The CRR/CRD framework applies primarily to credit institutions and systemically important investment firms (Class 1 under IFR). It imposes minimum capital requirements, supervisory reviews, and transparency obligations, along with liquidity rules such as the LCR and NSFR. Large EU banks or systemic broker-dealers typically use this framework.
In contrast, the IFR/IFD framework applies to non-systemic investment firms (Classes 2 and 3), with capital requirements based on specific risk-based K-factors (like RtF, RtC, and RtM). It simplifies obligations for smaller firms and does not impose liquidity ratios, making it more suitable for entities like Malta-licensed CFD brokers or asset managers.
How do they interact?
(a) Firm Classification
| Firm Type | Regime | Criteria |
| Banks & systemic firms | CRR/CRD | Asset threshold (>€30B) or banking license. |
| Non-systemic investment firms | IFR/IFD | K-factors determine Class 2 or 3. |
(b) Overlaps & Exemptions
- Class 1 firms (under IFR) fall back into CRR/CRD.
- Class 2/3 firms follow IFR/IFD but must still comply with MiFID II conduct rules.
- CRR Lite: IFR simplifies capital rules for small firms (e.g., no FRTB for Class 3).
(c) Key Differences
| Feature | CRR/CRD | IFR/IFD |
| Scope | Banks, systemic firms | Non-systemic investment firms |
| Capital Rules | Complex (Pillar 1-3) | K-factor-based |
| Liquidity | LCR, NSFR required | No liquidity ratios |
| Reporting | COREP, FINREP | Simplified (IFR reporting) |
Under the EU’s regulatory landscape, investment firms begin under the IFR/IFD regime—but if they grow beyond €30 billion in assets and become systemically important, they transition to the more rigorous CRR/CRD framework. Banks, on the other hand, are always governed by CRR/CRD rules, even when operating investment arms. For smaller firms, the IFR/IFD offers a clear advantage: lower compliance costs and a more streamlined regulatory approach. Understanding this distinction is key for firms navigating growth and regulatory change.
Please contact us for more information and guidance.