This work analyses the impact on the capital requirements of Italian banks and investment firms of the changes introduced to the European regulations relating to the prudential requirements for credit institutions (Capital Requirements Regulation, CRR2) and for the investment firms (Investment Firms Regulation, IFR). For banks, the focus is on the changes made to the CRR2 in terms of credit risk, leverage ratio and liquidity; for investment firms, the impact of the IFR as a whole is assessed.
The regulatory changes have resulted in a reduction of capital requirements for both banks and investment firms, although limited to those entities that have specific business models, such as banks that provide financing to small and medium-sized enterprises or salary-backed loans. Banks were largely compliant with the new liquidity requirement on the net stable funding ratio (NSFR) and the one on leverage ratio before their actual application.
