ECB Supervision Newsletter: Large investment firms: new licence, new supervisor
Investment firms play an important role in capital markets because they offer investors access to securities and derivatives markets through a number of different services, including investment advice, portfolio management, brokerage, order execution, proprietary trading and underwriting.
These firms are regulated and supervised for a number of reasons, including to preserve financial stability, protect investors and ensure an orderly failure in the event of a firm’s insolvency.
From 26 June 2021 investment firms will be subject to a new European regulatory regime. These new rules are intended to better reflect the actual risks taken by the different types of investment firms and to make the supervision of such firms more effective.
The new regime introduces various categories of investment firms. The largest firms will be classified as credit institutions and will therefore need to be licensed as such. These bank-like firms will continue to be subject to the Capital Requirements Regulation and Directive.
In most cases, the ECB will assume responsibility for their direct supervision. Smaller investment firms will be subject to a new regime that is more tailored to their activities, risk profile and size.