IFPR - Implementing the new Prudential Regime
The UK Investment Firm Prudential Regime (IFPR) will apply to all investment firms authorised by the FCA under the Markets in Financial Instruments Directive (MiFID) as well as those firms undertaking additional MiFID activities such as Collective Portfolio Management Investment firms (CPMIs).
The new prudential regime will also bring significant changes for firms that were previously out of scope of being categorised in other prudential categories such as BIRPU, IFPRU and exempt CAD firms. Under the IFPR, those categories will cease to exist, and all firms will be categorised as either SNI (small non-interconnected) firms or non-SNI, depending on the regulatory activities they carry out and the financial thresholds they meet.
The IFPR will bring changes to the own funds requirements firms should hold at all times based on the MiFID investment services and activities they have permission to undertake. The capital requirements of SNI firms will be the higher of the Fixed Overhead Requirements (FOR) and the Permanent Minimum Capital (PMR). Additionally, non-SNI firms will have to calculate ‘K-factors’; an entirely new concept which aims to capture the risk of harm posed by a firm to the market, to customers, and the firm itself.
Recently we published an article in which we outlined some of the most important changes that FCA investment firms must start preparing for. For further information please click the links below:
Complyport has been working hard to ensure that our clients are adequately prepared for the implementation of the new prudential regime (IFPR) that will come into force on 1 January 2022. We want to ensure that our clients will be able to meet the new IFPR requirements; ranging from holding additional liquid assets, increased regulatory capital, and the new governance, remuneration and reporting requirements before the expected date of implementation. Complyport can provide your firm with an IFPR impact assessment, to make certain you have a clear roadmap outlining what needs to be completed to ensure compliance by the 1st of January 2022.
Another important change is that the FCA proposes to introduce the Internal Capital Adequacy and Risk Assessment (ICARA) process to replace the current FCA Internal Capital Adequacy Assessment Process (ICAAP) for all investment firms. As part of ICARA, firms will have to conduct business model analysis, stress testing, recovery, and wind-down planning. The FCA has proposed that wind-down planning is something that all firms must address as part of their regular business planning and make adequate provision.
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