What is the IFR/IFD prudential reporting mandate?
The IFR/IFD (Investment Firms Regulation and Directive) prudential regime began to apply to all EU investment firms from June 26, 2021.
The new regime covers investment firms functioning under MiFiD II (Markets in Financial Instruments Directive II). It revises capital composition, liquidity, governance, remuneration, and supervision requirements for the firms based on the ‘Class’ or category to which they belong.
Systemically important investment firms — which are categorized under Class 1, 1a, and 1b — will continue to comply with the existing CRR/CRD IV regime (Capital Requirements Regulation; Capital Requirements Directive IV). Such investment firms are placed in the same class as deposit-taking credit institutions.
‘Non-systemic’ investment firms are categorized under Class 2 and Class 3. These will have to comply with new IFR/IFD reporting requirements.
For firms in Class 2, the reporting obligation is quarterly and will commence on September 30, 2021. The first submission from Class 2 firms is expected by November 11, 2021.
For firms in Class 3, the reporting obligation is annual and will commence from December 31, 2021. Their first submission is expected by February 11, 2022.
Why is the IFR/IFD regime being brought in?
Until now, all investment firms have been subject to the CRD IV/CRR prudential regime based on Basel requirements. However, these were primarily designed to cover credit institutions like banks. They are therefore thought to only partially cover the specific risks associated with the various services offered by investment firms. The IFD/IFR prudential regime was formulated to account for this deficiency in the previous regime.
Basel norms are a set of banking regulations issued by the Basel Committee on Banking Supervision. They help coordinate banking regulations across the globe and strengthen the international banking system.
What are investment firms supposed to do?
To prepare for the IFR/IFD regime, investment firms need to undertake a few activities. Some of these include but are not limited to:
- Assessing the classification applicable to them
- Evaluating obligations under the said classification
- Ensuring processes and controls are in place to capture core data, complete required calculations and validate results
- Converting their report into the XBRLformat for onward submission to the local regulator
IRIS iDEAL® for IFR/IFD compliance
IRIS iDEAL® — our SaaS regulatory compliance software — is a completely integrated XBRL transformation engine for investment firms under the IFR/IFD reporting regime:
If you are a Class 2 or Class 3 firm under MiFID II, IRIS iDEAL® can —
- Fully incorporate the EBA Reporting Framework 3.1
- Integrate with an automated reporting framework
- Facilitate auto data extraction and XBRL instance generation
- Provide modularity to incorporate future changes in business rules or taxonomies