EBA publishes draft technical standards on the prudential consolidation of an investment firm group and completes its Roadmap on investment firms

EBA has published a draft RTS on the scope and methods of consolidation of an investment firm group under Article 7(5) IFR.
These RTS provide detailed guidance on the scope and methods for the prudential consolidation, as well as the methodology for the consolidation of capital requirements and the rules applicable for minority interest and additional Tier 1 and Tier 2 instruments issued by subsidiaries in the context of prudential consolidation. The aim of these RTS is to ensure prudential consolidation is carried out in a harmonised and consistent way.
The IFR requires investment firm groups to identify a parent undertaking and those of its subsidiaries that are subject to the IFR to carry out the consolidation of the group. Particular attention is given to the setting up of a proper organisational structure and appropriate internal control mechanisms to ensure that the data required for consolidation are duly processed and reported.
In developing these draft RTS, the EBA has leveraged, where possible, the existing work on the prudential consolidation of credit institutions. However, differences exist based on the legal texts (i.e. IFR vs CRR), so the scope of consolidation for investment firm groups is more limited than that of banking groups and calls for a closer alignment with Article 22 of the Accounting Directive in terms of entities in the scope of consolidation, as well as on the methods for consolidation available to investment firm groups.
These draft RTS are the final regulatory product of the EBA Roadmap on Investment Firms. However, the EBA is continuing its work on the implementation of the IFR/IFD package, including in the context of the IFR/IFD review, which has been requested by the European Commission.
The publication of these draft RTS is an important step towards ensuring that investment firm groups are subject to appropriate prudential supervision and regulation. It will provide greater clarity and guidance on how investment firms can meet their prudential obligations under the IFR and enable regulators to more effectively monitor and supervise investment firm groups.