March 14 2019
MiFID II is driving customers away from the capital markets
- GBIC unveils new study
- MiFID II annoys customers
- Securities culture in Germany at risk
The German Banking Industry Committee (GBIC) has studied the impact of the European Markets in Financial Instruments Directive (MiFID II). Professor Stephan Paul of Ruhr University Bochum interviewed around 3,000 customers and over 150 banks in Germany on behalf of GBIC.
Andreas Krautscheid, Chief Executive of the Association of German Banks, which as this year’s coordinator speaks for GBIC, commented on the results of the study as follows: “The assumption has now become a certainty: European lawmakers have clearly overshot the mark with MiFID II. It’s an annoyance for customers, a nightmare for banks and advisers and is doing a disservice to investor protection and the securities culture in Germany.”
The study shows that customers feel overwhelmed and confused by the excess of information. Many investors want to decide for themselves if they wish to do without certain information (such as constantly repetitive information on costs) or receive information afterwards (following telephone orders, for instance). “A very modest benefit for customers is outweighed by huge costs for German banks,” said Krautscheid. The study showed that banks have had to spend an average of 3.7 million euros to meet the European regulatory requirements of MiFID II/MiFIR and the Regulation on key information documents (PRIIPs Regulation) – and this does not include future costs. If this is multiplied up to cover the approximately 1,600 German banks, the total cost is in the range of billions of euros. “Money the banks could have put to much better use investing in the future,” Krautscheid added.
The German banks also warn of a decline in the amount of investment advice on offer. “Rigid regulation means that advice is now only being offered in selected branches. Older and less mobile customers, in particular, are at risk of being cut off from transactions in securities,” Professor Paul criticises in his study.
GBIC also criticises the one-size-fits-all treatment of customers and calls for more scope to differentiate: “Professional clients – such as investment funds – do not have the same need for protection as retail investors. But MiFID II forces us to treat professionals like beginners.”
“Europe needs a strong securities culture,” Krautscheid stressed against the backdrop of low interest rates and the steadily rising necessity for private provision for old age. This objective was being undermined by MiFID II in its present form. GBIC therefore calls for the MiFID review to be placed at the very top of the new European Commission’s agenda in autumn 2019.
The “Impact study of MiFID/MiFIR and PRIIPs Regulation: effectiveness and efficiency of the new rules against the backdrop of investor and consumer protection – a qualitative-empirical analysis” was carried out by Professor Stephan Paul of Ruhr University Bochum on behalf of the German Banking Industry Committee and completed in February 2019.