On 20th of February, the EACB hosted an event to present the outcome of its post-implementation impact assessment of MiFID II and MiFIR which was timely following the launch two days earlier of the public consultation on the review of this legislation by the European Commission. Here’s what the different speakers at the event have to say about the MiFID II/ MiFIR review.
Dear Mr Ferber, you hosted the EACB’s event on MiFID II. This is clearly a topic that concerns you. What do you expect from the European Commission regarding their MiFID II/ MiFIR review?
The MiFID II/ MiFIR review is a good opportunity to take stock regarding which aspects of MiFID II work well and which are in need of an overhaul. Having talked to many stakeholders, I have the impression that many retail clients feel overwhelmed by the amount of information they are being provided with when they want to buy a financial product. We will have to take a hard look at how we can improve the investor protection rules within MiFID II to truly empower retail investors. At the same time, some of the MiFID II provisions have turned out to be quite cumbersome for smaller financial players. If we do it right, we can kill two birds with one stone and make things easier for both retail clients and intermediaries.
Markus FERBER, Coordinator & Member of the ECON Committee, European Parliament
Dear Mr Lueder, many financial market participants have been vocal about implementation issues experienced since MiFID II entered into force. In your view, which are the issues which the European Commisison should prioritise in its upcoming review of MiFID II/ MiFIR? And is it the Commission’s intention to undertake a REFIT-type approach to the review or a total overhaul of the legislation?
We look at securities markets as a whole, good returns for investors require that wholesale markets function in their interest as well. That is why our consultation raises a host of issues relating to the European infrastructure for equities and bond trading, the potential introduction of a consolidated trading tape and the streamlining of disclosures to be made to end investors. We consider that all these aspects are linked, without transparent trading markets, investor portfolios will not generate the optimal returns that retail investors should be able to expect. In terms of ambition, we will wait and see what our stakeholder consultation will yield. What matters is that we improve trading and investment conditions, creating an environment where direct participation in the stock and bond markets becomes the norm, rather than the exception.
Tilman LUEDER, Head of Unit - Securities Markets, DG FISMA, European Commission
Dear Mr Zaghini, you presented the EACB’s whitepaper during the event “MiFID II Review: Towards a more effective framework respecting diversity and consumer choice”. What were the main elements from the whitepaper on which you focused, in order to address the goals represented in the event title? And how is all this relevant to co-operative banks?
It is widely known that the focus (and the DNA) of Co-operative Banks is on the retail market and financing to SMEs. Rightly so, it is for this reason that our event focused on the following elements from our whitepaper:
1. Access of retail clients to capital markets;
2. Availability of capital for SMEs; and
3. Market diversity.
Overall, we observe that MiFID II has had some unintended consequences affecting co-operative banks and their clients. Co-operative banks adapted their business model and in several cases withdrew from providing investment services or investment advice altogether, which impacts market diversity. At the same time, many retail clients are withdrawing from capital markets altogether due to costs, information overload, lack of suitable product offering and various other reasons. This is diminishing the level of consumer choice and access to capital markets. If we take this together with the fact that the initial implementation costs and running costs combined are in some cases higher then for core banking regulation rules deriving from CRR/CRD, we believe there is scope to adjust MiFID II and create a more effective framework. Whilst we as EACB strongly believe that a great step forward has been made since the introduction of MiFID I in 2007, and with MiFID II in 2018, we would like to see a “Refit-type” review on amendments of specific technical issues within the legislation. Of course, we understand that a comprehensive review of the whole text should take place, but we are not in favour of going in the direction of a MiFID III. .
The review must also take into consideration convergence with other regulation both in securities markets legislation but also in banking and other Commission regulatory agendas. For banks who are pulled between compliance in the banking union and CMU sphere, this is especially relevant. From a more general viewpoint, the review must also not forget other parallel agendas being discussed: sustainable finance agenda, digital finance agenda and the implications of Brexit in order to be truly effective. However, effectiveness does not only mean convergence but also simplicity. Our opinion is that the three EU institutions should focus on Level 1 & 2 changes primarily in order to realise all these goals as this provides legal clarity. That said, it is also important that any clarification provided by ESMA at Level 3 is clear and concise. And that timing of publication of all the levels of text is aligned so as not to put further strain on the financial markets (who must update their systems) but also investors (who struggle to keep up with the volume and complexity of the information disclosed to them).
At the end of the day, our wish is that MiFID II can actually be used in order to boost retail investment and ensure investor protection, but at the same time addressing the challenges faced by the various financial market players falling under scope of the regulation.
Giuseppe ZAGHINI, Chair, EACB Financial Markets Working Group; Head of Regulatory Coordination, Iccrea Banca; member of ESMA Corporate Finance Standing Committee