September 29, 2017 / 9:50 AM / a year ago

EU watchdog proposes lighter rules for banks' smaller investment firms

LONDON (Reuters) - Small investment firms belonging to big banks in the European Union should not have to comply with the full panoply of rules designed for their parents, the bloc’s banking watchdog recommended on Friday.

The European Banking Authority (EBA) said it has recommended in an “opinion” that there should be a new, two-tier system of rules for smaller investment firms as part of a drive to make the rules more “proportional”.

“The Opinion includes a series of recommendations aiming to develop a single and harmonized set of requirements that are reasonably simple, proportionate and relevant to the nature of investment firms,” the EBA said in a statement.

“In addition, this Opinion includes recommendations for the introduction of very simple prudential requirements for small investment firms that provide limited services or activities.”

EBA also recommends more flexibility in how smaller firms pay bonuses. Banks must defer a portion of a bonus over several years, and pay this portion in a bank’s shares or other instruments.

Smaller firms have complained that they either don’t issue shares or that the bonuses they pay are so modest that deferring them has become an administrative headache.

Waivers should be available for small firms and staff that received a low level of remuneration, EBA said.

The recommendations have been sent to the European Commission, which can propose amendments to EU laws.

Reporting by Huw Jones; Editing by Greg Mahlich

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