The study was carried out by Coalition, a specialist research group that produces benchmark reports on corporate and investment banking revenues and industry league tables.
They quantified the impact of Mifid II — which forces more transparency on how investors pay for everything from research to fixed income trades — based on interviews with the world’s top 12 investment banks and estimates from Coalition’s research team.
"People have been exaggerating how Mifid is going to impact,” said Eric Li, Coalition’s research director, who describes the actual revenue impact of minus 2.6 per cent as an “almost marginal decline”.
“If we get two rounds of rate increases from the Bank of England and the ECB (European Central Bank) normalises monetary policy . . . all of this impact we probably will never see,” Mr Li added.
Equity research has been banks’ biggest Mifid II battleground, since the rules make it impossible for them to carry on distributing research for free and includes the price into the commissions paid on trades.
Coalition’s research shows that while the proportionate impact on equity research is greatest — with a predicted revenue fall of more than 20 per cent — the fallout for banks’ balance sheet is small. That is because cash equities, which includes equity research, accounts for just 2 per cent of total Emea corporate and investment banking revenues for the 12 banks. [...]
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