Additionally, Bovill financial consultancy firm believes that the new measures will make the UK less attractive for investors. The country’s economy is currently receiving a double blow from COVID-19 and Brexit. Thus, these measures may crumble the economy further. All regulated firms have one month left to respond to the FCA’s consultation paper on the new regulations. Around 33% of the UK’s 3,844 MiFID investment firms are exempt from the European Union’s Internal Capital Adequacy Assessment (ICAAP).
Additional regulations
Firms that were previously exempt will have to undergo an Internal Capital Adequacy and Risk Assessment (ICARA) for the first time after the UK leaves the EU. The FCA plans to take a harder line with the new prudential regime. 28% of firms that participated in a Bovill poll said they would need additional resources, including systems and people, to meet these ICARA requirements. FCA’s new Investment Firm Prudential Regime (IFPR) is set to replace the EU’s Investment Firms Regulation (IFR) and Investment Firms Directive (IFD). Reports indicate that the new regulation is scheduled to take effect in the summer of 2021. Managing Consultant at Bovill, Harpartap Singh, said: The ICARA may be an onerous and rigorous process and the FCA never gave much warning. Analysts think some smaller firms will struggle.
Affected organizations
Most of the polled organizations are worried about the new regime’s group capital requirements. 45% of them said that they would be affected. These new requirements and regulations mean that groups of British firms may need to hold capital in the UK. The rule will affect firms even if their parent company is based elsewhere. Singh believes that the group capital requirements affect many firms. They might might make the UK less attractive for investment fund managers seeking to set up or expand. Almost 50 firms said that they will respond to the FCA’s consultation paper on IFPR. Singh commented: With just a month until the deadline, firms are encouraged to have their say. They can respond directly to polls to influence regulation that will affect them adversely for years to come. Methodology: Survey results taken from a poll of 134 attendees at Bovill’s webinar on 16th July entitled: “A new prudential regime – what the FCA’s announcement means for you“.
