The UK's Financial Services Authority has published a report outlining its assessment of the overall costs and benefits for the financial services industry of implementing the Markets in Financial Instruments Directive, or MiFID, in the UK.
The Financial Services Authority (FSA) report attempts to quantify the benefits of MiFID and sets these alongside the costs of implementation. Findings indicated that MiFID could generate up to GBP200 million per year in quantifiable ongoing benefits, which will be attributable mainly to reductions in compliance and transaction costs.
Depending on how MiFID affects individual businesses, the paper has provided aggregate figures of the quantified one-off cost of implementing MiFID, varying between GBP870 million and GBP1 billion, with ongoing costs of around an extra GBP100 million a year.
It is in the nature of regulation that costs are relatively easier to define and quantify for firms while benefits can be harder to pin down, said Hector Sants, FSA managing director for wholesale and institutional markets. As we have already foreshadowed, 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 report is separate from the detailed cost-benefiting analysis undertaken in relation to specific policy decisions.