The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have published their joint technical advice to the European Commission in response to its Call for Advice on the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD).

In their advice, the two authorities proposed limiting significant amendments to the existing framework, noting that it has proven to be fit for purpose.

This assessment was confirmed by stakeholder feedback received during the joint consultation process.

The recommendations put forward by the EBA and ESMA are designed to enhance the proportionality and overall functioning of the prudential framework.

They also aim to improve the framework’s ability to promote a level playing field among investment firms, as well as between investment firms and financial institutions that perform similar activities.

The joint report outlines several areas where greater or lesser alignment with the banking framework could be beneficial.

It identifies the need to refine definitions, calculation methodologies, and the monitoring of thresholds applicable to investment firms.

The report also stresses the importance of harmonising the scope of calculation in order to ensure consistent application of the prudential framework across the European Union.

In addition to these recommendations, the report addresses a wider range of regulatory topics, including the adequacy of own funds requirements and the potential implications of the European Union’s Banking Package.

It also examines issues related to the prudential consolidation of investment firm groups and aspects concerning remuneration practices within the sector.

The joint advice further considers how the IFR and IFD frameworks interact with other key pieces of European regulation.

These include the Market in Crypto-Assets Regulation, the Undertakings for Collective Investment in Transferable Securities Directive, and the Alternative Investment Fund Managers Directive.

The EBA and ESMA will now submit their joint report to the European Commission for further consideration.