Germany Says Proposed MiFID Market-Rules Delay Comes Up Short

  • German Finance Ministry makes case to fellow nations in report
  • Asks to index delay to transposition of rules into EU law

The German Finance Ministry said proposed delays for MiFID II, the complex legislation affecting nearly every financial firm operating in the 28-nation bloc, don’t go far enough in giving nations and banks time to adjust.

Germany wants the EU to consider a more nuanced delay than the setback proposed by the European Commission, which if enacted would set the new law into force at the start of 2018. The finance ministry instead is calling for a set of deadlines tied to whenever the final rules take shape, according to a paper sent last week to negotiators from EU nations.

“To delay the date of application will, however, not be enough to allow all relevant parties an appropriate implementation,” says the non-public paper, which was obtained by Bloomberg News. It cites “significant delays” and technical challenges that call for a longer phase-in process.

The commission’s proposal was seen as too little too late by politicians when it came out in February. A group of 17 finance ministries, led by Germany and the U.K., voiced concerns immediately about the time needed to convert the EU rules into national law. The European Securities and Markets Authority triggered the delay last year, saying there wasn’t sufficient time for banks and other financial institutions to build the necessary data-reporting systems before the original 2017 deadline.

Under the EU’s original plan, the MiFID rules were supposed to be clarified by January of this year, so they could take effect for financial firms 12 months later at the start of 2017. The commission’s proposed one-year delay doesn’t take account of uncertainty over when the rules will be finished, the German Finance Ministry said.

9-Month Transition

In the paper, Germany seeks a nine-month transition period for nations to adapt the EU rules into national law, starting from whenever the regulations are made final. After that period ends, banks and other affected firms need six months to apply the new regulations, the paper said.

“Market participants, trading venues and competent authorities also need to be prepared for the new framework with a full view to all upcoming national and European requirements,” according to the paper. “To achieve this, the implementation into national law cannot be started before the delegated acts and regulatory technical standards have been adopted.”

At a Monday hearing in the German parliament’s finance committee, EU authorities offered differing views of how the transition process should go.

“We feel bound to the original timetable,” said Tilman Lueder, head of the investment funds policy unit in the EU commission’s financial services department. He said “national implementation creates a legal framework and should be established as soon as possible to secure legal certainty.”

The commission can’t put final rules in place without sign-off from nations and the European Parliament, who must agree to any changes from the originally negotiated legislation. ESMA, which sets technical standards across the 28-nation bloc, says it can’t provide clear guidance until the commission finishes its rule-making.

“Our problem is that we can’t start designing the computer systems,” said Verena Ross, a director at the Paris-based ESMA. “We are waiting to get some clarity from the EU Commission -- if we don’t get some clarity soon, time is running out.”

Top European Parliament lawmakers echoed similar sentiments in a March 1 letter to Jonathan Hill, the EU’s financial-services commissioner. Markus Ferber and Roberto Gualtieri demanded the commission adopt the detailed, technical measures needed for MiFID II to work as soon as possible. They’ve called for setting the deadline for countries to convert MiFID II into their national laws at July 3, 2017.

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