1.   Where the investment firm does not meet the conditions for qualifying as a small and non-interconnected investment firm as set out in Article 12(1) of Regulation (EU) 2019/2033, competent authorities shall, having regard to the business model, legal form, the business and risk strategy, and the scale and complexity of the activities of the investment firm, during their reviews carried out in accordance with Articles 36 and 37 of Directive (EU) 2019/2034, measure any material risk or material element of risk deriving from the investment firm’s ongoing activities, which that firm poses to itself, to its clients and to the market, and which is not covered or not fully covered by the K-factor requirement set out in Part Three, Title II, of Regulation (EU) 2019/2033.

Competent authorities shall determine the capital that would be considered adequate to cover the relevant risks related to the K-factor requirement.

2.   The measurement referred to in paragraph 1 shall be made separately for each risk category set out as ‘Risk-to-Client’ (RtC), ‘Risk-to-Market’ (RtM) and ‘Risk-to-Firm’ (RtF) in Article 15 of Regulation (EU) 2019/2033.

By way of derogation from the first subparagraph, for investment firms subject to an initial capital requirement lower than the requirement laid down in Article 9(1) of Directive (EU) 2019/2034, where competent authorities deem a more granular quantification not feasible or overly burdensome, the measurement shall be performed on an aggregate level.

3.   The measurement referred to in paragraph 2 shall identify and quantify material risks or elements of risks for each risk category, including risks from the use of the alternative internal model approach as referred to in Article 22, point (c), of Regulation (EU) 2019/2033, based on the indicative qualitative metrics set out in Article 6(2), (3) and (4), of this Regulation and on expert judgement to be delivered by competent authorities.

4.   Competent authorities shall ensure that the capital considered adequate to cover material risks related to the K-factor requirement is not lower than the total K-factor requirement.