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EU Banks Spend Billions To Comply With New MiFID II Regulations

Bankers in the European Union (EU) worked tirelessly this week to ensure that the launch of the latest banking reforms happened smoothly on Wednesday. These changes were made to ensure that the financial crisis that gripped the world a decade ago would not happen again. The new banking reforms are known as the Markets in Financial Instruments Directive II (MiFID II) and have been delayed by over a year.

MiFID II was finally given the green light and is expected to streamline banking and financial operations in Europe. Banks and financial firms have spent millions of euros to ensure that they can implement these rules smoothly.

Estimates by Expand, which is a part of the Boston Consulting Group and IHS Markit, say that the total spending for MiFID II compliance was around $2.1 billion.

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The main focus of these rules is to ensure that there is increased transparency in international financial deals and that there are better protections for investors. All these were done to lessen some of the problems faced previously in the financial crisis of 2007 to 2009. One of the noticeable changes is that all trades involving stocks and bonds need to be reported and collated. This gathering of data allows regulators a chance to spot bubbles early on so that they are in a position to sound alarm bells.

Besides providing information on possible bubbles, MiFID II can also be a big help to traders. The information that is required to be submitted can give savvy investors an idea of which trading platforms can offer the best possible deals. Additionally, asset managers are now required to show investors who paid for their stock research.

Bankers worked day-and- night to pull this off smoothly. The European Securities and Markets Authority (ESMA) which was in charge of the roll-out released several statements right before Christmas that was meant to iron out a few issues. Additionally, several banks and trading firms had their staff working round the clock for a number of days as the implementation date drew near. Despite fears of the new rules disrupting trading, transactions are still as smooth as ever.

As of now only 11 of the 28 EU member states have completely implemented MiFID II into their country’s laws. Britain, France and Germany are among the 11 countries that have fully adopted MiFID II. ESMA has announced that all firms can follow MiFID II even if their home country has not finished the legislative process.

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