EBF Position on MIFIR Review
January 2023
EBF POSITION PAPER
EBF Position on MIFIR Review
BRUSSELS, 12 January 2023 – The European Banking Federation (EBF) is a strong supporter of deepening the Capital Market Union and believes that the MiFIR review proposal presented by the European Commission (EC) on November 25, 2021 is critical for increasing the competitiveness of financial market actors operating in the EU-27 and the attractiveness of the EU’s regulatory framework. However, the EBF has concerns about several of the MiFIR reform proposals, which were not subject to proper analysis or impact assessments, making it difficult to assess their impact and potentially leading to unintended consequences for investment firms, clients, and the EU capital market as a whole.
- Consolidated Tape and Handling Increasing Market Data Costs: The EBF supports the EC’s proposal to establish a consolidated tape (CT) but suggests some adjustments be made and for ESMA’s recommendations to be included in binding EU legislation. The EBF also highlights that the creation of a CT may not solve the issue of increasing market data costs.
- Need for a Calibrated CT: EBF members generally support a well-calibrated consolidated tape, but the CT data needs to be of the highest quality to guarantee data excellence and dependable retrievability at all times. This includes well-calibrated deferrals in post-trade transparency obligations and not including the MIC code of the SIs, to avoid unintended consequences.
- Asset Class Priority and Scope of Data: The EBF suggests prioritizing the establishment of a CT for equity (also jointly with ETF instruments) over a CT for bond instruments, and for a proper cost-benefit analysis to be conducted for derivatives. The scope of data should include pre and post-trade data for shares and ETFs, and post-trade data for bonds as close as possible to real-time.
- Mandatory Contribution: The EBF welcomes the mandatory contribution submitted free of charge by trading venues and approved publication agreements to the CT provider. They also recommend a fair and bearable revenue sharing system for data contributors, to promote further harmonization of data formats, quality, and standards.
- Importance of MiFIR Review Proposal: The EBF believes that the MiFIR review proposal is critical to increase the competitiveness of financial market actors operating in the EU-27 and the attractiveness of the EU’s regulatory framework. They encourage proper analysis and impact assessments for all proposed reforms to ensure the EU capital market is not negatively impacted.
For more information:
Marta Morellato, Financing Sustainable Growth team, m.morellato@ebf.eu
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About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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]]>Proposal for review of the Distance Marketing of Financial Services Directive: EBF key priorities
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The European Banking Federation welcomes the European Commission’s proposal for a new Directive on Distance Marketing of Financial Services (DMFSD).
We consider the DMFSD being overall short, simple, agile as well as having a technology-neutral approach. These features allow it to be effective to compensate, in particular, for shortcomings in directives which do not cover certain aspects of consumer protection. At EBF level, the key priorities in light of the proposal focus on the following points :
- Withdrawal button: the withdrawal button should remain at the initiative of the trader, without being mandatory for the consumer. It entails high and disproportionate IT costs for all providers, triggering structural and operational changes. On top of the withdrawal button itself, providers will have to be able to manage the various other withdrawal channels (since the button would be one among several possibilities). Moreover, we are skeptical as to the fact that customers may engage and disengage too easily, which would subsequently disrupt the smooth processing of genuine engagements. It would also lead to additional administrative burden as well as IT developments, the cost of which will be borne eventually by consumers. Besides, the rationale as laid down in the EC proposal is not to make the withdrawal more burdensome than the procedure for concluding the contract. This can be materialized by stipulating that the trader is obliged to provide for on-line adequate and comprehensive information aimed at ensuring an easy and conscious withdrawal from the contract.
- Pre-contractual and contractual information should be provided in a timely manner and in good time, as to preserve the fluidity of the customer journey and not to make the procedures more cumbersome without benefit to the consumer is of utmost importance. Also, the one-day requirement will lead to obstacles for consumers seeking banking services, while it could be an impediment for those consumers who feel sufficiently informed and, as such, they are willing or need to conclude the contract without unnecessary delay.
- Precedence and prevalence of sector-specific legislation: Where a sectoral directive already exists and contains provisions of the pre-contractual information and right of withdrawal [e.g. the Credit Consumer Directive (CCD); Mortgage Credit Directive (MCD) or Payment Services Directive (PSD)], these provisions enshrined should apply and prevail over the DMFSD. The latter should serve its purpose as “safety net” for consumers when specific legislation does not exist.
- Distance contract by telephone: In cases of a financial contract at distance, the supplier shall fulfil his obligation to provide information to consumer immediately after the conclusion of the contract, if the latter has been concluded at the consumer’s request using a means of distance communication. With the aim of upholding technological neutrality, in the event that new distance marketing techniques rendered available in the future, which do not allow for the transmission of pre-contractual information before the conclusion of the contract, EBF aims to highlight that for any other means of distance communication, the contract which does not allow for the transmission of the contractual terms and conditions as well as the information, the trader shall fulfil his obligation to provide information immediately after the conclusion of the distance contract.”
For more information:
Vassileia Tsirigkaki, Policy Adviser – Prudential Policy & Supervision, v.tsirigkaki@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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]]>EBF RESPONSE TO ESMA CONSULTATION ON THE REVIEW OF MIFID II SUITABILITY GUIDELINES
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Brussels, 27 April 2022 – While the EBF welcomes the ultimate objective of the European legislators and supervisors of promoting sustainable development, as a general remark, we would like to stress that the new regulation gives rise to a number of inconsistencies, concerns, and doubts which we believe will hinder its implementation.
- On timing: Misalignment of the application timelines of SFDR and MIFIR rules on integrating sustainability will create great legal uncertainty for investment firms and a huge confusion for their clients. We therefore fully support the European joint industry proposal to postpone the implementation of the MiFID II delegated act until 1 July 2023. We believe ESMA should allow for a sufficient broad implementation period following the publication of the final guidelines.
- Regarding the scope, we don’t support a “one-size fits all” approach as proposed which does not take into account the different nature and characteristics of certain financial instruments, especially for instruments that are not under the scope of SFDR and Taxonomy Regulations.
- Need for greater flexibility: we believe that ESMA’s suggested approach is excessively complex.
- Data availability: the new rules on sustainability preferences will have a big impact not only on investment firms subject to MiFID but also on producers manufacturers of financial instruments (e.g. companies and asset managers) that will need to provide a large amount of data that is needed in order for investment firms to fulfill their requirements.
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For more information:
Pauline Guerin, Senior Policy Adviser, Financing Growth p.guerin@ebf.eu
Marta Morellato, Financing Sustainable Growth team, m.morellato@ebf.eu
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About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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]]>EBF POSITION PAPER
EBF Position on MIFIR Review
BRUSSELS, 25 April 2022 – The European Banking Federation (EBF) is a strong supporter of deepening the Capital Market Union to enable financial markets to play a stronger role in light of the EU-27 financing challenges. The review proposal presented by the European Commission (COM) on 25 November 2021 is of critical importance to increase the competitiveness of financial market actors operating in the EU-27 and the attractiveness of the Union’s regulatory framework.
With these objectives in mind, the EBF finds it regrettable that several of the MiFIR reform proposals both for the equity and the non-equity transparency regimes are based on expected benefits that were neither subject to an in-depth analysis nor to a comprehensive impact assessment. This makes the impact of the proposals very difficult to assess and could lead to unintended consequences for investment firms, clients and the EU capital market as a whole.
In more details,
- EBF supports a well calibrated consolidated tape. However, we would like to highlight that the creation of a CT will not solve the issue of increasing market data costs.
- On equity transparency, the EBF would like to highlight the need for ensuring competitiveness and attractiveness of EU equity markets. We believe the current proposal regarding equity SI will create a three-tiered set of mid-point trading rules exacerbates the existing issues of complexity afflicting equity markets in Europe and damages investors’ perceptions of the quality of the market’s structure.
- On non-equity transparency, there is a need for well-calibrated deferrals taking the needs of clients and liquidity providers into account. In this context, both price and volume need to be deferred for longer periods than proposed by the Commission (i.e. endo of the day). We also support to keep the the size specific to the instrument (SSTI) as it is since it protects SIs against undue risks.
- Regarding payment for order flow, MiFID II already provides for a broad toolkit of regulatory measures in this scope (i.e. well calibrated provisions on conflict of interest, inducements and best execution).
Finally, our members’ experience from both MiFID I and MiFID II/MiFIR shows that there should be a minimum of at least 18 months from the time both Level 1 and Level 2 are published in the “Official Journal of the European Union” until they apply
For more information:
Paulin Guérin, Senior Policy Adviser Financing Sustainable Growth, p.guerin@ebf.eu
Marta Morellato, Financing Sustainable Growth team, m.morellato@ebf.eu
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About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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]]>CONSULTATION RESPONSE
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European Commission consultation on retail investment strategy: EBF Response
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EBF advisers: Pauline Guérin, Alexia Femia
BRUSSELS, 30 July 2021 – The EBF welcomes the opportunity to contribute to the retail investment strategy under the Capital Markets Union action plan. The CMU action plan is key to financing the green recovery and the digital transformation of the EU and to fostering investors’ access to capital markets (see EBF position on CMU action plan available here).
While the EBF and its members support a high level of investor protection, the EBF also highlights the need for a flexible approach in order not to disincentivize investors from investing in corporates via financial markets. At this stage, rather than issuing new rules and requirements, EBF members would support supervisory convergence between national competent authorities. EBF supports some adjustments in order to broaden the professional client category under MiFID II as the current client categorization criteria are too strict and often difficult to be satisfied, with the consequence that an excessively small portion of clients can be considered professional or professional on request.
In more detail, the EBF considers that the following key elements should be taken into consideration when developing a European Retail Investment Strategy:
- Avoid information overload and ensure that the pre-contractual information is understood by retail clients. To this end, the EBF supports a simplification of the investor protection rules in combination with measures to increase clients’ level of financial literacy.
- EU rules should be technology-neutral, i.e. work regardless of the distribution channel such as face-to-face meetings or digital communication (internet bank or apps).
- With the above principles in mind, the EBF supports a targeted alignment of MiFID, UCITS, and PRIIPs – in particular as regards pre-contractual information and rules on electronic communication per default.
- In order to ensure retail access to investment products, the EBF supports a review of the product governance requirements in MiFID II, in particular, the approach is taken for non-complex financial instruments (e.g. UCITS, ETFs, etc.). The EBF opposes a full ban on inducements as we believe that this will have negative consequences such as limiting the products that are offered to retail clients and restricting investment advice.
- Improvement of the use, alignment, and timeliness of Q&A for different legislation requirements (MAR, MiFID, UCITS, PRIIPS), thus allowing market players to achieve a deeper understanding of the applicable legislation. While ESMA’s Q&As are efficient in providing examples of particular events, to facilitate the understanding of non-legal readers such examples should be provided with proportionality assumptions.
- Make sure that any new information requirements be made subject to client/consumer testing. We would also like to underline that firms should be allowed sufficient time to implement amendments. Moreover, it is important that gold-plating of requirements at the national level be avoided.
EBF would like to highlight the importance of financial literacy. We do, in fact, believe that investment culture can only evolve with investors and entrepreneurs who are comfortable with their choices and we, therefore, need a major EU campaign for financial literacy to educate those who access capital markets. In this context, the EBF continues to support the joint EC/OECD-INFE project to develop a financial competence framework for the EU, which will play a central role in providing European investors with the knowledge needed to participate in financial markets confidently and contribute to accelerating the post-pandemic recovery.
More information:
Pauline Guérin, Senior Policy Adviser, Financing Growth p.guerin@ebf.eu
Alexia Femia, Financing Growth, a.femia@ebf.eu
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]]>EBF advisor: Pauline Guerin
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Publication date: 15 February 2021
The EBF welcomes the five-year Capital Market Union (CMU) action plan published by the European Commission (EC) in September 2020. The EBF agrees with the EC that the development of the European Union’s (EU) financial markets is key to finance the green recovery and the digital transformation of the EU. While the EBF has always been an active supporter of EU capital markets, the health crisis and the economic recovery make the CMU project even more necessary than before. With a limited access to the UK since 1 January 2021, the EU needs to become autonomous and to offer competitive alternatives to corporates and investors.
While supporting most of the actions proposed in the action plan, the EBF would like to highlight the need for prioritisation and sequencing of the 16 actions identified by the EC. Furthermore, our members believe that certain actions are a prerequisite to pursuing others. We understand this action plan requires a pan-EU agreement on the whole scope (with no cherry-picking). Therefore, the responsive and timely behaviour of all interested stakeholders will ensure overall success and prevent unnecessary delays in the implementation of the long-awaited key milestones and be beneficial for the EU‘s economy and citizens.
The EBF would like to emphasise the need for a strong commitment from the EU Member States, as bold actions and reforms for deeper capital markets can only be taken with their support, as advocated by Markets4Europe, the cross-sectorial and EU wide campaign coordinated by the EBF.
For more information:
Pauline Guerin, Senior Policy Adviser, Financing Growth p.guerin@ebf.eu
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]]>Distance Marketing of Financial Services Directive: EBF response
The EBF acknowledges that the Distance Marketing of Financial Services Directive (DMFSD) aims at creating a common framework for cross-border market of financial services, while attaining a high level of consumer protection. We see the relevance of the Directive for the creation of a truly European cross-border market and we recognise that banks across the EU implemented the DMFSD rigorously after its adoption. The Directive and its requirements represent today a consolidated and well-known toolbox for both consumers and providers.
We believe the majority of the requirements in the text of the legislation proved to cope well with any subsequent evolutions both in the market as well as in technology thanks to their flexible nature. We particularly praise the design of the Directive, that by being principle-based rather than rule-based, was able to adapt to evolving use of digital devices and continues ensuring a high level of consumer protection. We are in favour of a technologically neutral legislation and regulatory stability. Before considering a review of the text, we recommend however a sound cost-benefit analysis of the current text given that IT investments and gold-plating practices often result in additional obligation and costs for services providers, without the achievement of clear benefits for consumers.
For more information:
Elona Morina, Policy Adviser – Retail and Innovation, e.morina@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 4,500 banks – large and small, wholesale and retail, local and international – employing about 2.1 million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that securely handle more than 400 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
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]]>EBF advisors: Noémie Papp & Hélène Benoist
Publication date: 28 November 2017
Key points:
- Automated decision-making can be beneficial to individuals and society: It is important to keep in mind that human decisions are often biased and automated decision-making can therefore help make fairer and more accurate decisions. It is important that the profiling and automated decision-making regulatory framework as a whole puts in place appropriate safeguards without blocking the legitimate and socially beneficial uses of these techniques.
- Focus on the “right not to be subject to automated decision-making” in line with the GDPR instead of full prohibition: The EBF fully supports the objectives of the GDPR to increase transparency around personal data processing and to give data subjects more control over their data. However, the WP29’s interpretation of Article 22(1) as a full prohibition is going further than what is prescribed by the GDPR which grants data subjects the right not to be subject to a decision based solely on automated processing of personal data.
- Protect consumers and ensure compliance with existing legal and supervisory requirements: In financial services, profiling may be used among other things with the view to protect consumers and comply with regulatory/supervisory requirements imposed on the banking sector, such as the Anti-Money Laundering Directive (AMLD) to detect and prevent fraud, terrorism financing or other criminal activity; the Markets in Financial Instruments Directive (MiFID); the Consumer Credit Directive (CCD) or the Mortgage Credit Directive (MCD) with the aim to ensure responsible lending and that individuals do not become over-indebted; it could help the bank to make risk models or to manage the firm’s overall financial position.
- Propose only examples reflecting the general practice of the industry: Although we appreciate the efforts of the WP29 to provide clarity and reassure stakeholders of their rights, we believe some of the examples provided do not reflect the general practice of the banking sector but represent more marginal examples. This approach could be misleading and could lead data subjects to make false assumptions about their banks. We thus offer changes and amendments to highlight more effectively the potential (and, in many cases, already existing) benefits of automated decision-making and profiling in relation to the financial industry.
- Importance to ensure consistency between the approach undertaken by the WP29 and the existing EU/national legislation. The Guidelines should clarify that uses of automated decision-making for compliance with rules and guidance set by a regulatory authority are considered to be ‘authorised’. It is important to ensure full consistency with the approach adopted by other regulatory/supervisory bodies, authorities or agencies.
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]]>Financial sector associations warn that EC proposals will limit number of sustainable products available for consumers
Joint letter
BRUSSELS, 27 July – A group of financial sector associations – including the European Banking Federation – has written to the European Commission to warn against its proposals to introduce a new definition of “sustainability preferences” across the delegated acts of MiFID II, the Insurance Distribution Directive (IDD) and Solvency II.
While supporting the Commission’s aim of creating a strong framework for investment that supports the transition to sustainability, insurers have serious concerns that these proposals, as currently drafted, will, in fact, restrict customers’ access to sustainable finance by unduly limiting the range of products that insurers are able to offer them.
The issue is that, while the Commission’s proposal for the definition of sustainability preferences is based on the product categories under the Sustainable Finance Disclosure Regulation (SFDR), it adds extra criteria – regarding adverse impacts and sustainable investment criteria – for products that promote sustainable characteristics, but that do not necessarily have a sustainability objective.
This would result in a group of sustainable products that would comply with the stringent requirements of the SFDR, but that cannot be offered to a customer who expresses a desire for a sustainable product due to the additional criteria the Commission is proposing.
Therefore, these newly proposed requirements on eligible products are inconsistent with the SFDR’s objectives and should be removed. Otherwise, they would hamper the ability of the financial sector to offer products that support and accelerate the transition to a more sustainable economy.
MEDIA CONTACT:
EBF Media Centre, press@ebf.eu, +32 2 508 3732
ABOUT THE EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere. Website: www.ebf.eu
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]]>EBF advisor: Pauline Guerin
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Publication date: 17 January 2020
On behalf of the European banking sector, the EBF has submitted its comments to the European Supervisory Authorities (ESAs) on the consultation paper setting out proposed amendments to the Commission Delegated Regulation (EU) 2017/653 (PRIIPs Delegated Regulation).
The EBF welcomes the ESAs’ consultation. However, Contradictory, overlapping and complex disclosure requirements may discourage retail clients from investing in financial instruments. Therefore, the EBF considers that it is important to work in the context of CMU 2.0 in order to improve retail investors’ trust into financial markets for the benefit of companies looking for funding and for the investors’ long-term benefit. In fact, as advocated for in the Markets4Europe[1] campaign (a private sector initiative identifying both the obstacles to a deeper CMU and the required reforms leading to better integrated markets) the EBF believes that requirements relating to clients’ information should be reviewed as to be made more consistent and less overwhelming for clients. We believe that a higher quality of information should be favoured.
General comments
The EBF would like to raise number of concerns:
– The EBF welcomes the ESAs consultation on PRIIPS but wonders how this articulates with any level 1 change. The Level 1 revision should take place before any level 2 change in order not to double the implementation work and costs.
– The EBF supports further alignment between PRIIPS and MIFID
– The EBF supports that the amendments proposed in this Consultation Paper should be implemented at one point in time. However, it is important to ensure that investment firms are given sufficient time to adapt to the new rules, as they will require substantive changes to IT systems.
– The EBF welcomes the ESA statement from 24 October 2019 regarding the PRIIPs scope for bonds but it would welcome further clarification as to the intended scope on Level 1.
– The EBF believes that a more comprehensive consumer testing of the proposals should have been conducted, in particular regarding the cost & charges information.
– Though the aim of comparability of the PRIIP KID documents is desirable – the comparability should only be a priority for de-facto comparable products. For instance, investors do not compare OTC derivatives with investment funds and comparability at the cost of precision and adequate information should therefore not be the result.
– The EBF would like to make a general comment on the articulation between PRIIPS and UCITS requirements: in the case a UCITS KID is required, the EBF does not the support the idea of duplicating the requirements with a PRIIPS KID.
– The EBF would also like to underline the fact that all new requirements such as PRIIPS demand a high level of data information. The need for data increases in parallel with regulatory requirements which then lead to an increase of data costs.
[1] For more information, please visit https://markets4europe.eu/
For more information:
Pauline Guerin, p.guerin@ebf.eu
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