9.2 Investment Firm Regulation

361. The IFR contains two major changes compared to the existing regime in the CRD 2013 and the CRR. Firstly, to achieve a more appropriate regime for investment firms, the European Commission defined a new categorization of investment firms. The largest, most complex and systemically important investment firms, the so-called “Class 1 investment firms”, are to remain within the scope of the CRD 2013 and CRR prudential regime for credit institutions, by means of a change to the definition of “credit institution” in the CRR, which will define these systemically important investment firms as credit institutions. For the other two categories of investment firms, the European Commission, based on the EBA opinion, designed a new approach to calculate risks specific to the business models of investment firms and the products and services they offer. For these Class 1 investment firm, the authorisation regimes shifts from MiFID II to the CRR, whereas for all other investment firms the MiFID II will remain the applicable regime for authorisations. The next sections will discuss certain aspects of IFR, starting with the new categorization and the risk measurement approach, dubbed the “K-factor approach”.