Commenting on the European Commission’s proposals on the second Markets in Financial Instrument Directive (MiFID) released today, Giles Williams, Co-head of KPMG’s Regulatory Centre of Excellence in Europe, said:
“In the wake of the financial crisis no one can argue with the principle of introducing greater transparency and safety measures into the sector, which the MiFID 2 proposals seek to achieve.
“Our fear, however, is that the costs of implementing this regulation have been significantly underestimated and come at a time when financial institutions are already under enormous regulatory, profitability and cost pressures.
“Both the one-off and annual costs of implementation estimated by the European Commission are questionable. The operational costs of setting up the right technology infrastructures to comply with the additional data and reporting requirements alone are likely to exceed the overall figure mooted by the Commission. Getting the simple initial reporting data right under MiFID 1 proved to be time consuming and expensive; MiFID 2 is even more complex.
“Financial institutions are already grappling with other major regulatory initiatives which are driving up costs across the business. These costs can only be passed onto investors and clients; and neither will welcome this.
“As global regulatory changes continue to load costs and complexity into financial institutions, some serious questions are being asked by institutions about which areas of their business to either discontinue or move jurisdiction. While reducing risk through transparency will be welcomed by many, we do need to fully understand the impact of the legislation on Europe’s ability to compete in the global financial services marketplace.
“If businesses move out of the EU, it does call into question the Commission’s estimate on the potential yield on the Financial Transaction Tax.”
Notes to editor
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