MIFID II Recast: practical implementation summary

ABBL Published 03.11.2021

The MIFID Directive is undergoing a major overhaul, in two steps:

  • Step 1: A quick fix initiative with (smaller) changes related to COVID-19
  • Step 2: A broader recast which is currently being planned by the European Commission.

The ABBL and Arendt & Medernach jointly organised a webinar on this topic, in order to discuss the background of the regulatory change and to provide a practitioner’s perspective. Participants were able to follow the discussion between Gilles Pierre, Head of Banking Regulation & Financial Markets ABBL, Glenn Meyer and Marc Mouton from Arendt & Medernach. Alexandra Merlino, EU Regulatory Affairs Lead at Banque Pictet Luxembourg and Aurélie Cassou, Senior European Affairs advisor at the ABBL’s Brussels office, also gave their comments.

Summary of practical implementation aspects and their impact on the banking sector

Making electronic communications the default method

Impacts on the banking sector:

  • Ability to switch off paper communications where eligible customers choose to do so.
  • Quick win as changes to the communications production interface are relatively easy to implement with IT.

Costs & charges disclosures

Impact on the banking sector: Limited benefit of the exemption from the disclosure obligation, as investment advice (transaction-based disclosure) and portfolio management (disclosure at the establishment of the relationship) remain within the scope.

Ex-post reporting requirements

Impacts on the banking sector:

  • Change system settings to disable mandatory service reporting for eligible customers.
  • A welcome development for firms serving retail customers.

Exemption from product governance requirement

Impacts on the banking sector :

  • Indirect impact for firms that are not product manufacturers as such.
  • Potential impact on the ability to recommend certain products

Suspension of best execution reports

Impacts on the banking sector:

  • The exemption from providing best execution reports applies only to execution venues and systematic internalisers.
  • No added value for banks

Unbundling of research

Impact on the banking sector: No impact for banks that pay for research, whether or not the relevant costs are bundled with execution costs.

Requirement to produce a cost-benefit analysis (CBA)

Impacts on the banking sector :

  • CBA is integrated into the sustainability process
  • Documentation can be strengthened to properly document the transition from one investment solution to another.

Requirements for commodity derivatives

Impact on the banking sector: Impact limited to banks offering agricultural products and/or commodities deemed critical or important.

If you missed this conference or would like to see it again, contact us to receive the link to the video – reserved for ABBL Members.

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