The European Banking Authority (EBA) on Friday published a discussion paper that seeks feedback on the design of a new prudential regime for investment firms that would be tailored for different business models and inherent risks.
For firms that are not considered systemically important, the EBA recommends a framework that focuseson the risks that firms pose to their customers, and to market integrity and liquidity.
Under the EBA’s proposed approach, firms that pose more risk to customers and markets would face higher capital requirements than those that represent less risk. Firms that take on more risk to their own operations would have to hold more capital, too.
The paper also sets out three possible alternatives for setting minimum liquidity requirements, which are different that the approach used for global banks under the Basel III capital adequacy regime.
A public hearing is slated for Dec. 1, and the consultation runs until Feb. 2, 2017.
The EBA aims to finalize its approach by mid-2017.