Global investment banks could lose millions of dollars on new legislation

Portfolio
Some global investment banks risk losing up to USD 240 million in business by 2020 as a regulatory overhaul, which will change the way securities research is priced and used, makes independent firms more attractive for clients, Reuters cited the results of a financial consultancy report on Wednesday.
The future and charges of researches and analyses will also be on the agenda at Portfolio’s MiFID II conference on 7 September 2017. Don’t miss it! Register now!


Unlike the big banks, the smaller securities research firms do not offer trading or corporate finance. They rely entirely on what they charge for research, as will be required under the European Union's Markets in Financial Instruments Directive, or MiFID II, due to take effect in January 2018, Reuters reminded.

According to a report released on Monday by Hong Kong-based Quinlan & Associates, independent research firms are steadily growing, reflecting their capacity to produce analyses at a considerably lower cost than major sell-side brokerages.

The gradual shift to independent researchers and the high costs associated with sustaining research divisions is piling up the pressure on large global investment banks, the report said.

The Quinlan report forecast that some research departments of big banks could face losses of up to USD 240 million post-MiFID II under their current structures. The potential loss does not take into account additional costs tied to a bank's MiFID II compliance obligations, the report added.

Under MiFID II, investment banks must charge fund managers an explicit fee for research rather than bundling the cost into trading commissions charged to clients, as at present.

The immediate impact of the regulation will be in Europe - a recent Greenwich Study predicts a cut of USD 100 million by European money managers in research budgets over the next 12 months - but Asia and the United States will be affected too.

To mitigate the impact, banks can choose to transition from the current "fully-integrated" model to operating research out of a separate unit such as a joint venture or outsourcing research to independent research providers, the Quinlan report said.

The future and charges of researches and analyses will also be on the agenda at Portfolio’s MiFID II conference on 7 September 2017. Don’t miss it! Register now!
 

More in Economy

GettyImages-171413154-család-étel-étkezés-étrend-gyermek-kisgyermek-otthon-reggeli-szendvics
July 02, 2025 09:49

A legendary factory is to be shut down in Hungary, affecting 160 workers

'Bear cheese' is produced here too

GettyImages 1463402564-duna-épület-főváros-idegenforgalom-turizmus-város
July 02, 2025 09:25

Vienna-based research institute publishes stark analysis of Hungary's economic prospects

Situation far from the 'flying start' predicted by the PM

nő parlament budapest
July 02, 2025 09:20

Hungary almost reaches annual net issuance goal in H1 - debt manager

96% of planned yearly net issuance has been completed

catl
July 02, 2025 08:24

Layoffs begin at CATL's battery plant in Debrecen

Presumably linked to the halting of the second plant unit's preparation

GettyImages-1455628122-
July 01, 2025 13:28

New political opinion polls show a steadily growing Tisza lead over Fidesz

Several surveys received in the last week

AudiQ3Sportbacknyitocimlap
July 01, 2025 11:26

Audi's Győr plant struggles - Hundreds of jobs at risk

Trade union forms strike committee at supplier as well

LATEST NEWS

Detailed search