EU Moves to Clarify Rules for Investment Firms Crossing the €30 Billion Threshold

European investment firms with assets exceeding €30 billion could face a significantly different regulatory regime under new proposals being developed by the European Banking Authority, as regulators seek to clarify when large investment firms must transition into the banking framework.

The EBA has launched a consultation covering three draft regulatory technical standards that would establish clearer rules for calculating an investment firm's total assets, reporting those figures to regulators and determining whether a large firm can receive an exemption from the requirement to obtain a banking licence.

The proposals are linked to amendments made to the EU Capital Requirements Directive in 2024 and are intended to create a more consistent and proportionate approach to regulating large investment firms.

Under the existing framework, certain investment firms whose total assets reach or exceed €30 billion can fall within the definition of a credit institution. Such firms are generally required to obtain authorisation as a credit institution rather than continuing to operate solely under an investment firm licence under the Markets in Financial Instruments framework.

The €30 billion threshold is therefore an important regulatory dividing line. Crossing it can potentially bring an investment firm into a much more extensive prudential regime, with requirements and supervisory expectations associated with banking institutions.

The latest EBA proposals are designed to make the application of that threshold more predictable.

One of the central issues addressed by the consultation is how total assets should actually be calculated. The amendments to the Capital Requirements Directive clarified which entities need to be considered when determining whether an investment firm has reached the threshold, prompting the EBA to revise its technical standards accordingly.

The methodology is particularly important for investment firms that form part of larger corporate groups. The calculation can involve assets at both individual and group level, meaning that the structure of a firm's wider organisation can affect whether it reaches the regulatory threshold.

The new standards are intended to establish a harmonised methodology so that firms and national regulators can determine the relevant asset level using consistent criteria across the European Union.

The EBA is also proposing more detailed reporting requirements. Investment firms with significant asset levels will need to provide regulators with information allowing them to monitor whether the €30 billion threshold has been reached or is approaching.

This monitoring requirement is important because regulatory classification cannot simply be assessed once and then ignored. Firms whose assets fluctuate significantly may need to maintain systems capable of identifying when their regulatory position changes.

The consultation also introduces an important element of flexibility.

For the first time, the EBA is proposing technical standards setting out the factors that national competent authorities should consider when deciding whether to grant a waiver from the requirement to obtain a credit institution authorisation.

Where such a waiver is granted, an investment firm that would otherwise fall within the banking authorisation requirement could continue operating under its existing investment firm authorisation.

The waiver mechanism is intended to support a more proportionate regulatory approach. Not every large investment firm necessarily presents the same risks as a traditional deposit-taking bank, and the proposed framework recognises that the nature of an institution's activities should be taken into account.

This distinction is particularly relevant for large investment businesses whose activities may involve substantial trading positions or underwriting operations but do not necessarily involve the same balance-sheet or customer risks associated with conventional banking.

The new approach therefore seeks to balance two objectives: ensuring that systemically important investment firms are subject to sufficiently robust prudential oversight while avoiding unnecessary regulatory burdens where the risks do not justify full banking authorisation.

The issue has wider implications for firms operating across the European financial sector. Becoming a credit institution can significantly affect a company's capital requirements, governance arrangements, reporting obligations and supervisory relationships.

A firm approaching the €30 billion threshold may therefore need to consider its regulatory position well before actually crossing it.

For management teams, the calculation of total assets is consequently more than an accounting exercise. It can influence the firm's authorisation status, regulatory costs and the level of supervisory oversight to which it is subject.

The EBA's proposals also reflect the broader evolution of the EU's prudential framework for investment firms. The Investment Firms Regulation and Investment Firms Directive introduced a specialised framework intended to distinguish investment firms from banks and apply prudential requirements according to their particular risks.

At the same time, the framework recognises that some very large investment firms can become sufficiently significant that treating them purely as investment firms may no longer be appropriate.

The €30 billion threshold is designed to address precisely that issue. It provides a quantitative trigger for identifying firms whose scale and activities could justify treatment under the banking framework.

However, the calculation of assets can be complex, particularly where businesses operate through multiple entities or are part of international groups. The revised technical standards are therefore intended to reduce uncertainty over how the threshold should be applied.

The EBA has also linked the changes to a broader risk-based approach. The objective is not simply to impose additional regulation on the largest firms, but to ensure that the regulatory framework reflects the actual risks created by their size and activities.

This could be particularly relevant for European investment groups with significant trading operations. The way assets are measured can differ depending on accounting treatment, group structures and the nature of financial positions, making a consistent prudential methodology important for both firms and supervisors.

The proposed rules could also affect strategic decisions by firms approaching the threshold. Businesses may need to consider whether they should restructure particular activities, review group arrangements or prepare for the possibility of applying for a waiver.

However, any restructuring undertaken for regulatory purposes would need to remain consistent with the applicable legal and prudential requirements.

The consultation is also relevant to national regulators, which will ultimately be responsible for applying the framework and considering waiver requests. Establishing common criteria should reduce the risk of materially different approaches being adopted across EU member states.

The EBA's proposals specify factors that competent authorities should consider when assessing whether a waiver is appropriate. This should give both regulators and firms greater visibility over the circumstances in which continued operation under an investment firm authorisation may be possible.

The consultation process will remain open until 25 November 2026, giving financial institutions, industry associations and other interested stakeholders several months to submit comments. The EBA is also scheduled to hold a virtual public hearing on 30 September 2026.

The rules are not yet final. Feedback received during the consultation will be considered before the technical standards proceed through the EU legislative and regulatory process.

For investment firms, the consultation nevertheless provides an early indication of how regulators intend to apply the revised framework.

Firms with substantial assets may therefore want to review how their balance sheets are currently calculated, how their group structures could affect the €30 billion assessment and whether they would potentially qualify for a waiver if the threshold were reached.

The changes could be particularly important for large European investment firms engaged in proprietary trading, underwriting or other activities that bring them within the scope of the provisions governing reclassification as credit institutions.

The regulatory consequences of crossing the threshold can be significant. A firm moving into the banking framework may face additional capital, governance, reporting and supervisory requirements, as well as a different authorisation process.

At the same time, the proposed waiver mechanism could prevent firms from being automatically subjected to the full banking regime where their individual risk characteristics justify a different approach.

The consultation therefore represents an attempt to refine the boundary between investment firms and banks rather than simply tighten regulation across the board.

For the European financial sector, the development reflects regulators' continuing effort to ensure that prudential rules remain appropriate as financial businesses become larger and increasingly complex.

The €30 billion threshold remains the key trigger, but the EBA's proposals would provide greater clarity around how that figure is calculated, how regulators monitor firms approaching it and when an exemption from banking authorisation may be justified.

As the consultation progresses, investment firms and their advisers will be watching closely to determine how the final methodology could affect their regulatory status. The eventual rules are likely to be particularly relevant to the largest firms, but they may also influence how growing investment businesses plan their structures and compliance frameworks as they approach the threshold.

The proposed framework ultimately seeks to ensure that Europe's largest investment firms are subject to regulation proportionate to the risks they pose, while giving regulators sufficient information and flexibility to distinguish between firms that genuinely require banking-level supervision and those that can continue operating safely under the investment firm regime.

By fLEXI tEAM