The Financial Services Authority says the cost of
implementing the Markets in Financial Instruments Directive (MiFID)
in the UK could cost financial services firms up to £1bn, with
ongoing costs on top.
While the FSA says MiFID could generate around £200m in
quantifiable ongoing benefits, attributable mainly to reductions in
compliance and transaction costs, its implementation could cost
between £870m and £1bn.
There could also be extra ongoing costs of around £100m a year,
said the FSA.
MiFID is a major part of the EU Financial Services Action Plan.
It makes significant changes to the EU regulatory framework for
investment and securities business.
MiFID replaces the Investments Services Directive implemented in
1995, and is intended to take account of developments in financial
services and markets since then.
Among other costs, financial services firms will have to
reconfigure their systems to satisfy the demands of the
directive.
Hector Sants, FSA managing director for wholesale and
institutional markets, said, “It is clear that implementation of
MiFID represents a substantial cost to industry, particularly in
the upfront years, but it does create the potential for revenue
opportunities over the longer term. We would encourage firms to
focus on these opportunities.”
The FSA 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 benefits of MiFID were calculated against a number of
scenarios relating to the impact of MiFID on business practices and
dynamics in the UK’s financial services industry, and the extent to
which MiFID contributes to the aim of the Financial Services Action
Plan in helping to foster a single integrated market in EU
financial services.
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