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MiFID review

MiFID review

​​ESBG provides policy 'asks' to EU Commission in consultation


>> Read: ESBG response to MiFID II/MiFIR public consultation

>> See: ESBG overall position on MiFID


BRUSSELS, 14 May 2020 – Debate around MiFID II / MiFIR reform continues on the simplification of rules, an effort ESBG supports. The association of savings and retail bank in Europe recently provided their feedback on an array of ideas for reform. In its response to a recent European Commission consultation on the review of MiFID/MiFIR regulatory framework, ESBG especially spelled out needed ideas to help make the directive better for citizens and the overall financial system.

In late 2019, ESBG released a digest of its overall position, which stated that reforming MiFID II should be a key priority for the new European Commission. ESBG would encourage a well-thought review of MiFID II taking into account the issues stated below to eliminate the challenges that are counterproductive and do not increase investor protection.


More specific aspects detailed below:



ESBG opposes a ban on inducements to facilitate access to fee-based advice  “investment advice on an independent basis". In our view, fee-based investment advice is no valid alternative to commission-based investment advice because it is only accessible to wealthy clients and therefore socially unjust. Only commission-based investment advice can guarantee that all social classes have access to securities advice – regardless of their respective income or social status. The Commission itself found in an impact assessment that due to the tightening of inducements rules in relation to research, there has been a decline in investment research expenditures, especially with regard to SMEs. ESBG wants to highlight that an outright ban on inducements would create the same kind of risk, such as a decline in the offer of investment advice and an advice gap for population with low income and a need for free investment advice.

​Cost and charges disclosures

ESBG favours including a further category, between professional investors and retail investors, for people who are not professionals, but trade very frequently within a certain reference period. A separate, adjusted set of rules would definitely make sense to facilitate the trading experience while ensuring a reasonable level of investor protection. Experienced retail investors/semi-professional clients do not need dozens of pages containing the exactly same information on a very regular basis (i.e. every time that they are active on the markets). Experienced investors should therefore have the opportunity to opt out for certain information. The introduction of this new client category should be optional for investment firms, so that the investment firm itself can decide whether to take the necessary implementing measures or whether it prefers to automatically provide clients with a higher level of protection. Experienced retail clients /semi-professional clients should be able to waive the recording of telephone conversations and the ex ante cost transparency.

Telephone recordings

The requirements to inform the investor ex-ante on costs and inducements on a durable medium have created huge problems for telephone trading. Due to the greater time and administrative burden telephone orders entail, they are now also becoming less attractive for banks and investors. This is clearly demonstrated by the study of Ruhr University Bochum: 75.8% of banks now indicate that the importance of business conducted by telephone as a distribution channel is diminishing. This statement is also reflected on a quantitative level: the number of telephone orders is decreasing. Their share in the total number of orders with investment advice declined by 9.9 percentage points due to the new provisions, the equivalent of a relative drop of approximately 50% (H1 2017 vs H1 2018).

 Ex-ante information

The association throws much support behind a new Q&A 23 and 28 where ESMA has foreseen the opportunity to use standardised cost grids in some cases and to provide the ex-ante on a durable medium after the transaction, if the use of cost grids is not allowed. This is a great relief for banks and investors. In the MiFID II review, the two possibilities created in Q&A 23 and 28 should be included in the Level II legislation in order to create a higher legal certainty. Furthermore, recently, ESMA has proposed in its technical advice on inducements and costs and charges disclosure to introduce a provision that allows to provide the ex-ante after the order is executed. In our view, the concrete wording shall be harmonised with the current provision in the PRIIPs regulation as in most cases the distributor has to provide both the ex-ante and the PRIIPs KID.

​Product governance

The product governance requirements are an effective tool to prevent that investors purchase products that are not targeted for them. The requirements can prevent misselling. However, ESBG thinks that the risk of mis- selling basically only exists with regard to retail investors. Therefore, the product governance requirements should not apply to transactions with professional clients and eligible counterparties.

Why policymakers should act

ESBG members have experienced 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. ESBG is not fully convinced that the current set of rules gives the right incentives for retail investors to consider investing their money in the markets  and thereby providing the real economy with financing. Quite to the contrary, many clients have already  partly or complete  withdrawn from capital markets. This is a highly alarming development as the investment in financial instruments is a very important aspect of private retirement arrangements  especially in times when interest rates are permanently low. 

Moreover, ESBG Members are facing high cost of compliance in order to meet MiFID II and KID PRIIPs requirements. This would have a great impact on the financial advice services provided by local savings and retail banks. 


In June 2014, the European Commission adopted new rules revising the Markets in Financial Instruments Directive (MiFID) framework. These consist of a directive (MiFID II) and a regulation (MiFIR). MiFID II aims to reinforce the rules on securities markets by ensuring that organised trading takes place on regulated platforms, introducing rules on algorithmic and high frequency trading, improving the transparency and oversight of financial markets including derivatives markets and enhancing investor protection. MiFID II and MiFIR became applicable as from 3 January 2018. The European Commission, taking into consideration ESMA's advice, is expected to present a legislative review proposal at the end of 2020 or in early 2021.


MiFid; European Institutions