Risk & Compliance

IFR/IFD: expansion of consolidated supervision

In a previous article, we wrote about the Investment Firm Regulation & Directive (IFR & IFD), which has been in force since 26 June 2021. The IFR & IFD replace the current prudential requirements for most investment firms, and possibly for investment institution managers providing investment services. De Nederlandsche Bank (DNB) expects investment institutions to have already identified the implications of the IFR/IFD for your firm and to make timely preparations to comply with the new regulations.

Date:February 14, 2021

DNB’s information request

DNB’s ‘Request for information in connection with the implementation of IFR/IFD’ can also be seen in this light. DNB’s information request focuses on obtaining information about your company’s capital requirements and group structure. Under IFR & IFD, more holding companies will come under DNB’s supervision and will have to comply with consolidated supervision. An expansion of consolidated supervision is therefore inevitable.

When there is consolidated supervision, it means that you have to comply with prudential supervision obligations at both the holding company level and the company level. The IFR requires three types of holding companies to comply with the obligations based on their consolidated situation.

Which types of holding companies does this apply to?

EU parent investment firm

An EU parent investment firm is a holding company that is also authorised as an investment firm and has subsidiaries that are investment firms or financial institutions.

EU parent holding company

An EU parent investment holding company is an entity whose main activity is to manage participations. These participations should mainly be holdings in financial institutions and investment firms. In addition, the group must not include a credit institution.

EU parent mixed financial holding company

An EU parent mixed financial holding company is a holding company that forms a financial conglomerate together with its subsidiaries. A financial conglomerate exists only if there is an insurance entity within the group.

Please note that if your holding company qualifies as an EU parent investment holding company or EU parent mixed financial holding company, not only the directors and supervisory directors of your company should be tested for suitability and reliability, but also those of the holding company. This only applies if they are persons other than the directors of the company.

Which companies fall within the consolidated situation?

If your holding company qualifies as one of these three types of holding company, you will need to comply with IFR/IFD based on your consolidated situation. The question then arises as to which subsidiaries should be included in the consolidated situation.

You should consider the consolidated situation as if your holding company were one company together with all investment firms, financial institutions, ancillary service providers and tied agents. In addition, you are deemed to include in the consolidation companies located outside the European Union if, if they were located in the European Union, they would also be considered as investment firms, financial institutions, ancillary service providers and tied agents.

Want to learn more?

Do you need help in answering DNB’s request for information? We are happy to help you qualify your company and advise you on what the new regime means for you. Please do not hesitate to contact us.