From CRR to IFR/IFD — Why Liechtenstein’s New ‘Wertpapierfirmengesetz’ Transforms Prudential Supervision and What It Means for Your Securities Business

Josef Bergt

2025

In the wake of the European Economic Area Joint Committee’s Decision No. 70/2025, whose approval by the Liechtenstein Parliament (Landtag) concludes Liechtenstein’s legislative journey towards the full transposition of Regulation (EU) 2019/2033 (IFR) and Directive (EU) 2019/2034 (IFD), the Principality, already famed for its agile yet robust financial-market architecture, has now placed an autonomous prudential regime for investment firms centre-stage, thereby consciously departing from the banking-centric CRR/CRD framework that, despite numerous exemptions, had long proven ill-suited to capture the variegated risk profiles of non-systemic securities intermediaries.

While the overarching policy objective—namely to align capital and liquidity requirements with the actual hazards emanating from, and borne by, securities firms—remains rooted in financial-stability considerations, the legislative package introduces unmistakably proportionate differentiations:

• Three-tier classification logic: Only “Class 1” entities of systemic relevance continue to fall under CRR/CRD, whereas “Class 2” and, importantly, the newly coined “Class 3” category for small and non-interconnected firms benefit from markedly streamlined obligations, provided that all quantitative thresholds of Article 12 IFR are undershot.
• Capital calculus through K-factors: Beyond the traditional fixed overhead and permanent-minimum tests, the IFR’s hallmark lies in its risk-sensitive “K-factor” methodology, which dissects client, market and firm-specific exposures and applies bespoke coefficients to each component.
• Liquidity buffer of one-third of fixed overheads: Pursuant to Article 43 IFR, firms must hold high-quality liquid assets equal to at least 33 % of the preceding year’s fixed costs, a rule deliberately anchored in a gone-concern perspective and—subject to regulatory notification—waivable for Class 3 entities.
• Granular disclosure duties: Comprehensive transparency regarding risk management, governance, own funds, remuneration, investment strategy and emerging ESG metrics remains mandatory for Class 2 firms, whereas Class 3 firms disclose only on an instrument-issuance trigger, ensuring investor information without imposing disproportionate burdens.

The legislative implementation materialised through the Wertpapierfirmengesetz (WPFG; Act on Investment Firms)—effective 1 February 2025—alongside concordant amendments to the Vermögensverwaltungsgesetz (VVG; Asset Management Act), thereby integrating the new supervisory paradigm seamlessly into Liechtenstein’s codebase. Bolstered by the Financial Market Authority’s (FMA) calibrated supervisory review and evaluation process (SREP) and by explicit empowerment to apply group capital surrogates for structurally simple holding constellations, the framework promises both legal certainty and competitive agility, especially for boutique asset-managers and fintech-oriented brokers.

Consequently, cross-border operators—whether domiciled in the EEA or offering services into it—must re-assess their organisational set-ups, remuneration policies and internal capital adequacy models, not least because failing to satisfy the freshly minted governance fitness-and-propriety standards may trigger sanctions extending to non-regulated holding vehicles.

At Bergt Law we combine deep regulatory insight with entrepreneurial pragmatism; our dedicated cross-disciplinary team stands ready to benchmark your business model against the new IFR/IFD matrix, to assist in crafting capital-efficiency strategies and to represent you before the FMA, thereby ensuring that compliance becomes a competitive edge rather than a mere obligation.

Sources: Report And Motion Concerning DECISION No. 70/2025 OF THE EEA JOINT COMMITTEE, No. 46/2025.

Strategic Take-Aways for Market Participants

• Right-sizing of prudential burdens unlocks cost efficiencies for qualifying Class 3 firms, but only after meticulous threshold testing and group-wide data aggregation.
• K-factor adoption demands novel data pipelines, yet offers a truer mirror of the risk-landscape and can release trapped capital when properly optimised.
• Liquidity rule-set calls for treasury management recalibration, with waiver applications presenting a valuable relief valve for low-risk entities.
• Governance and disclosure reforms embed ESG into the regulatory DNA, augmenting stakeholder scrutiny and shaping reputational outcomes.
• Implementation clock is ticking: WPFG is live, supervisory expectations are crystallising, and early movers will shape the interpretative practice.

For tailored guidance, visit bergt.law/en or contact our team directly.