IDEAS home Printed from https://ideas.repec.org/a/aza/jfc000/y2019v2i4p303-317.html
   My bibliography  Save this article

IFR/IFD: Practical implications of a new prudential regime for principal trading firms

Author

Listed:
  • Dorst, Diederik

Abstract

The Investment Firm Regulation and Directive package (IFR/IFD) presents a unique opportunity to design a bespoke European prudential regime for investment firms, including principal trading firms. Principal trading firms trade financial instruments for their own account and own risk and do not hold or manage client assets or money. The current Capital Requirements Regulation and Directive (CRR/CRDIV) were designed for banks and incorrectly assess risks connected to investment firms (such as trading firms). These types of firms have fundamentally different balance sheets, portfolios, holding periods and business models to which current metrics are not very well attuned. Although IFR’s methodologies are quite elegant in prescribing required capital for an incredibly diverse population of over 6,500 investment firms in Europe, there remain quite a few issues to be resolved. This is important because if metrics are implemented incorrectly, they may limit liquidity provision and risk transfer in the financial markets, thus affecting stability. Addressing these key elements will bring IFR/IFD closer to the policy intent to simplify and better tailor capital requirements, and other prudential requirements, to investment firms in order to make European markets more secure and more competitive.

Suggested Citation

  • Dorst, Diederik, 2019. "IFR/IFD: Practical implications of a new prudential regime for principal trading firms," Journal of Financial Compliance, Henry Stewart Publications, vol. 2(4), pages 303-317, June.
    • Handle: RePEc:aza:jfc000:y:2019:v:2:i:4:p:303-317
    as

    Download full text from publisher

    File URL: https://hstalks.com/article/610/download/
    Download Restriction: Requires a paid subscription for full access.
    File URL: https://hstalks.com/article/610/
    Download Restriction: Requires a paid subscription for full access.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    prudential regime; investment; firms; IFR/IFD; capital requirements; remuneration; principal trading; firms;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aza:jfc000:y:2019:v:2:i:4:p:303-317. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Henry Stewart Talks (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.