27 April 2007

EBF response on CESR consultation on inducements under MiFID

The EBF published its response to the CESR consultation on inducements under MiFID, noting that Europe’s banks do not fully share the analysis of the European Commission or CESR despite careful re-consideration of the interpretation. With regard to the ‘status of the recommendations’ whereby CESR members will apply them “in their day-to-day regulatory practices on a voluntary basis”, EBF has a somewhat paradoxical concern.

Either the recommendations will be adopted as de facto guidelines by Europe’s supervisors and thereby setting in motion a process to radically alter inter alia the fund distribution landscape by voluntary agreements.

Alternatively, and a more likely scenario, the recommendations will be applied in a piecemeal fashion by CESR members and in doing so create an “un-level” playing field with the distinct possibility for banks to arbitrage between more favourable and less favourable jurisdictions.

The FBE asks CESR to note that the changes CESR’s recommendations imply would be more readily accepted if they were debated over a longer period of time with stakeholders and preferably after MiFID has been implemented to not add to existing instability characteristic of this current period of transposition and systems testing.

Also, voluntary recommendations are not the appropriate instrument to deliver the implicit changes to European fund distribution structures.

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