Investment Firm Prudential Regime (IFPR)
The UK investment firm prudential regime ‘IFPR’ is a complete overhaul of the CRD/CRR rules that currently apply to investment firms. All MiFID investment firms will need to adopt to the new rules. The new regime is set to go live in the UK on the 1 January 2022. Pillar 4 welcomes the new rules as more attuned to investment firms whilst recognising several nuances they might cause to some investment firms. We have undertaken extensive research and documented several insights in this area.
In particular, matched principal brokers and local firms that currently make use of limitations awarded through CRDIV to entertain lower prudential requirements will see a significant increase in their minimum capital requirements due to an elimination of these limitations and treatment of both types of trading as 'principal dealing' or 'dealing on own account' whereby the new minimum requirement is £750K.
Trading venues (MTF and OTF) are set to benefit from a significantly lower minimum capital requirement of £150K from the current €730K requirement although wind down costs and other pillar 2 operational capital elements generally tend to be high for trading venues.
Our Consultants have helped several buy side, sell side, and trading venues, including IFPRU730K active risk-takers meet their prudential and liquidity requirements including reporting requirements. We recommend that firms take early action to assess the impact to their capital adequacy and risk models and plan well ahead of implementation of the new rules.
How Pillar 4 Can Help
> Tailored IFPR board briefing
> Preparing Impact Assessment specific to your business
> Preparation or update of ICARA and liquidity adequacy assessment including stress tests
> Preparation or update of pillar 2 framework
> Update risk management framework including risk appetite review and updates to risk policies
> Help developing practical and workable capital monitoring and reporting tools
> Regulatory strategy
> Regulatory change management
> Impact assessment and implementation