UK financial firms face £1 billlion start-up bill for Mifid
UK-based financial services firms could face a £1 billion bill for implementing the Markets in Financial Instruments Directive (Mifid), the UK’s Financial Services Authority (FSA) estimates.
The one-off cost of implementing Mifid is estimated to be between £870 million and £1 billion, with ongoing additional costs of about £100 million a year.
The heaviest financial burden will be the one-off costs arising from the introduction of the appropriateness test for non-advised sales, changes to client categorisation and best-execution requirements, and system changes required by new market transparency provisions (See: Mifid test is threat to banks).
However, Mifid could generate about £200 million per year in quantifiable ongoing benefits, which the FSA attributes to reductions in compliance and transaction costs.
Hector Sants, managing director of wholesale and institutional markets at the FSA, encouraged financial firms to focus on the opportunities offered by the directive – which comes into force next November – as well as the burden of additional costs.
Sants said: “It is in the nature of regulation that costs are relatively easy to define and quantify for firms, while benefits can be harder to pin down. As we have already foreshadowed, it is clear that implementation of Mifid represents a substantial cost to [the] industry particularly in the [next few] years, but it does create the potential for revenue opportunities over the longer term.”
The FSA’s cost estimates are based on a survey of firms in which they were asked to set out their actual and/or expected budget for Mifid implementation. The results from this survey were then aggregated using estimates of the total number of firms directly affected by Mifid. The benefits were calculated against a series of scenarios relating to the impact of Mifid on business practices in the UK’s financial services industry, and the extent to which Mifid contributes to the aim of creating a single EU market for financial services.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Esma denies need for new competitiveness mandate
MEP wants explicit requirement; Esma official says it’s already covered in existing rulebook
US regulators cut FRTB’s IMA capital hit by 59%, Isda finds
Trade body pushes for further changes to cross-product netting, default risk charge
US FRTB glitch could spit out negative capital charges
Effort to recognise risk diversification between IMA and standardised approach went too far
Euronext, LCH back Esma as exchange super-regulator
National oversight hurts Europe, exchange officials say – but some are not ready to accept a single watchdog
Double, but no trouble? CVA capital hit may lack clout
Industry opinion mixed around Basel III endgame derivatives charge
Amid debanking drama, banks try to say ‘no’, safely
A basic risk management tool – the ability to turn a customer away – has become a political football
Erba myth: will US banks choose new capital measure?
B3E gives US banks a dilemma – adopt expanded risk-based approach, or a new standardised alternative
Illiquid assets pricing still needs expert judgement, say banks
EU regulators want more transparency in valuations, but some asset prices remain elusive