Markets in
Financial Instruments Directive (MiFID)
What has the Capital
Requirements Directive / Basel ii to do with
the
Markets in
Financial Instruments Directive
(MiFID)?
Basel ii will be implemented in the European Union (EU) via the
Capital requirements Directive (CRD), which is legally binding for
every EU member state.
Most firms that have to comply with MiFID have also to comply with
the Capital Requirements Directive
which, among other things, sets requirements for the
regulatory capital a firm must hold.
CRD and MiFID both require similar:
-
corporate governance
-
board and senior management responsibility
-
‘four eyes’ - the management of a firm must be undertaken by at
least two persons of sufficient good repute and experience (to
ensure the sound and prudent management of the firm)
-
reporting lines (clearly, consistently and in a documented
manner specified)
-
allocation of functions and responsibilities
-
risk assessment, internal controls, safeguards and
organisation
-
effective internal reporting and communication of information
-
accounting procedures
-
business continuity
-
record keeping
-
outsourcing due diligence and risk assessment
CRD and MiFID requirements are so similar
that according to the UK FSA, banks can
implement these parallel requirements of both Directives in a
unified Common Platform.
In
the European Economic Area, the CRD /Basel ii will apply to "credit
institutions" and to all investment firms "as defined".
As defined
where?
"As
defined" means as defined in the Markets in Financial Instruments Directive (MiFID).
Firms that are only authorised to give investment advice or
receive and transmit orders from investors without holding client
money or securities
are excluded.
Basel II was envisaged to apply only to internationally active
banks, but EU did not like it. In the European Union Basel ii
applies to
all
banks and investment firms,
independent of their size or the geographical scope of their
activity.
Financial institutions dealing in the
same activity or providing similar services will
therefore be subject to the same capital
requirements, thus ensuring a level playing-field
within the EU.
More about MiFID Training at
www.mifid-training.net
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