What’s the latest on the new prudential regime for UK Investment Firms? – The FCA Consultation Process
What is IFPR?
The IFPR (Investment Firms Prudential Regime) is an initiative by the UK regulator to tailor capital requirements, consolidation, liquidity requirements among other areas, together with the associated regulatory reporting currently served by COREP, to a model that more appropriately reflects the activities of investment firms.
Who is affected?
IFPR will impact all MiFID firms deemed to be non-systemic. In practice this means all UK firms apart from eight larger institutions who will continue to be supervised under CRR and adopt CRD V.
When will IFPR start?
IFPR becomes effective from 1st Jan 2022, with a first reporting date of 31st March 2022
FCA Consultation Papers
The FCA have already published its first Consultation Paper (CP20/24) to gather feedback from the industry and will issue two more before the intended implementation date in January 2022.
The second, CP21/7, is due to conclude at the end of May.
The broad aim of IFPR is to do away with the ‘one size fits all types of financial institutions’ regulatory approach that currently applies, with specific intentions including:
- Enhancing consumer protection by reducing the likelihood of failure and, in the unfortunate event that a failure does happen, a reduction of wider consequent cost particularly with regard to investor compensation.
- Increasing systemic capital quality and giving scope to some firms to reduce overall capital cost
The current consultation paper CP21/7 asks for feedback on a number of areas such as:
New Own Funds requirements, including the calculation of
- Initial capital – Permanent Minimum Requirement (PMR)
- Fixed Overhead Requirement (FOR) – the minimum capital figure required to absorb losses in the event of a firm ceasing to trade.
- Activity based “K-factor” requirement (KFR) for some firms
(The new Own Funds requirement will be whichever is the highest of these three figures for a Non-SNI and of the PMR and FOR for an SNI).
Basic Liquid Assets requirements (On both an individual and consolidated basis )
The current proposal being for liquid assets holding of 1/3 of the Fixed Overhead Requirement described above; 1.6% of any client guarantees.
Regulatory Reporting requirements
The proposed reporting templates under IFPR have already been published – with around 50 new and amended templates that will apply dependant on a firms classification together with associated validations and cross validations.
This CP discusses specific issues around
Liquid Asset Requirement reporting – a quarterly return applying to all firms
Collective portfolio management investment firm (CPMIs) reporting requirements
Remuneration Reporting – in accordance with the new remuneration code applying to all firms
We would encourage all impacted firms to engage with the regulator’s consultation process to ensure that the regulated community has a voice in the formulation of the new regime.
How VERMEG can help
VERMEG is offering an comprehensive IFPR reporting solution on its AgileREPORTER platform tailored to a firm’s individual needs. VERMEG’s experts are monitoring all Regulator issuances to ensure that our solution evolves in alignment with the FCA’s intentions.
Flexible Deployment:
Cloud
Hosted by VERMEG – This involves a Fully Managed Service that includes all O/s, Database etc licencing, Regulatory and Platform updates, Security Patching, backups and business continuity among other benefits
Alternatively, if a firm requires deployment on its own private cloud this option is also fully supported.
On-Premise
For firms that have a preference for deployment on their own servers, a more traditional On-Premise offering is available.
Solutions that we offer
Full Automation – a full end to end solution is available incorporating data acquisition, regulatory calculation, return templates, all published validations and cross validations together with the required regulator submission.
On the other hand if a firm has a more simplified requirement, for example a fully or partially manual solution, AgileREPORTER is fully flexible in this regard.
Whichever solution is the right fit for your organisation, all added value functionality such as:
- Configurable Approval Workflow
- Request for Information Capability
- Commentary and Supporting Documentation as well as the AgileREPORTER Analysis Module are available.
Please contact us at communications@vermeg.com for more details as to how we can help you and look out for our webinars explaining IFPR and its implications.
ANDREW KESBEY – GLOBAL HEAD OF REGULATORY PRODUCT