The EACB has carefully analysed the Commission’s Proposal on the Retail Investment Strategy (RIS),as well as the Parliament and Council’s position, and the potential impact of the proposed changes on the cooperative banking business.
While, we are strongly critical of the RIS Proposal - which fails to align with the Capital Markets Union (CMU) objectives, by increasing complexity in the retail investment regulatory framework, and missed the opportunity to address the ESG Investment Framework - we remain convinced that the RIS presents an opportunity for legislators to address the challenges the EU financial markets are facing.
In line with the objectives of the Commission 2024-2029, we advocate for the simplification of the existing regulatory framework, in order to fulfil the EU ambitions of making capital markets more accessible and attractive to retail investors.
More in details, regarding the proposals amending MiFID II:
- We are concerned that the Value for Money (VfM) framework will have a disproportionate impact on retail banks, not least in terms of implementation efforts. The introduction of rigid benchmarks, with their narrow cost-based approach, will foster a race to the bottom based solely on costs, at the expenses of quality features valued by clients, ultimately limiting banks’ ability to offer products tailored to clients' needs, such as ESG products, as well as financial innovation.
The proposals of Council and Parliament on ‘peer grouping’ demonstrate that costly and complex benchmark test are unnecessary. However, we hold reservations on the introduction of a new database, in particular regarding its feasibility and complexity and in view of the focus on performance, which is hard to predict.
- On the proposals on inducements, we are concerned about the Council’s proposal introducing an "inducement test" and a set of “overarching principles”, which could to an unjustified ban on inducements through the back door, unnecessary complexity and duplication of existing legal requirements.
- We oppose the EU Commission's proposed "Best Interest Test," which we see as detrimental -if implemented- towards the overall investment journey. To name a few, we have concerns over its impact on investment firms' models, potential legal confusion, unnecessary product comparisons, and restrictive criteria that may push banks to offer overly simplified products, predominantly U.S.-based ETFs, which could inadvertently redirect investments to the U.S. economy over the EU.
- Reinforcing the appropriateness test would adversely affect the investment experience of clients who currently benefit from the simplicity of execution-only processes.
- Furthermore, we believe that:
- commission-based and fee-based advice should be subject to the same rules.
- it is sufficient to record and retain one copy of the standardised warning and to record when the warning was given to the client and retain these recordings for five years.
- Mandated standardised reports will bring additional IT costs without clear client benefit.
- Requiring additional training hours would disrupt consistency across Member States. We would suggest a more flexible approach.
- Since the RIS amend retail investor protection’s related provisions, the application of said provisions should target only retail investors and clearly exclude professional investors.
To learn more about our position on the Retail Investment Strategy, please read our detailed position paper.