7.2.4.1 Consolidation

286. Investment firms are subject to the same consolidation requirements as credit institutions. This means that an investment firm that does not obtain any waivers, has to comply with the CRR and the CRD 2013 on at least two levels:1 solo and consolidated. The CRR requirements are applicable at the individual or solo level2 of the institution and at the consolidated level of the institution3 and its parent (or the institution and its subsidiary). The CRR makes a further distinction between EU level consolidation,4 where the group is consolidated to the highest level within the EU and member state consolidation,5 where the group is consolidated to the highest level within one EU member state. An example of this might be a group of investment firms with a parent investment firm in Germany and a subsidiary in the Netherlands. The subsidiary in the Netherlands has to comply with the requirements of the CRR on an individual level. The parent investment firm in Germany has to comply with the CRR requirements on the basis of its individual situation, but it also has to comply with the CRR on the basis of the consolidated situation of both the parent investment firm and its subsidiary.

287. Although the consolidation rules in the CRR have not been significantly changed since the CRD 2006, one of the bigger changes in consolidation for investment firms has been the change in the CRR definition of investment firm6 as discussed previously in Section 7.1. The investment firms which are excluded from the CRR definition of investment firm are not subject to the CRR provisions on consolidation. If these investment firms did fall under the CRD 2006 definition of investment firm and were thus subject to the CRD III provisions on consolidation, they would face a significantly lighter prudential regime than before the entry into force of the CRR and the CRD 2013. This means that for the firms excluded from the CRR definition, these firms now falls outside the prudential scope of supervision. This does not mean that these risks, at group level, no longer occur, simply that supervisors no longer have the toolkit with which they can investigate the risks to the investment firm posed by its parent company or other group companies.

288. It is also possible for the investment firm to apply for a waiver for the application of the consolidated situation.7 This means that, when the waiver is granted, the investment firm will be subject to a specific consolidation regime based on Article 15 of the CRR.