ACA Compliance Group's Head of Prudential Practice, Michael Chambers, comments on the agreement struck last week by the EU for new prudential rules for investment firms across Europe…

• New agreement heralds tighter controls for financial firms operating in the EU

Having tracked the development of the new prudential framework for a number of years, it is promising to see that it’s approaching finalisation. We await further news to see which of the amendments proposed by the Parliament and Council make it into the adopted version.


While Brexit impacts all existing and developing EU legislation, it is highly unlikely that the UK will end up with a regime that is materially dissimilar to that adopted by the EU regardless of how of when Brexit ultimately transpires.


Some firms, for example commodity trading firms and FCA-authorised firms currently classified as exempt from the Capital Adequacy Directive, will be adversely affected by the capital framework, including new capital requirements and the need to conduct an internal capital adequacy assessment process and document this at least annually in a formal ICAAP report. These firms will be eager to see the final rules so they can develop their plan to meet the new requirements.


Some of the areas which require more technical development from the authorities, such as the specifications of regulatory reporting under the new regime, will be those which create the most operational upheaval, so firms need to monitor these developments too.