The FSA (UK) published on 2006-11-24 a paper on The Overall Impact of MiFID that sets out the FSA’s assessment of the overall costs and benefits for the financial services industry of implementing MiFID in the UK. The paper indicates that, under certain assumptions, MiFID could generate some £200 million per year in quantifiable ongoing benefits, although these are likely to be unevenly spread across different types of firm and sector. The quantified one-off cost of implementing MiFID could be between £870 million and £1 billion with on-going costs of around an extra £100 million a year.
These are aggregate figures: it is likely that the distribution of costs and benefits will vary among firms depending on exactly how MiFID affects their business. As the FSA has 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 FSA says in their comments to the paper.
The analysis in The overall impact of MiFID is based on three main pieces of work:
- A description, based on the FSA’s database of firms and their permissions, of the likely population of firms directly affected by MiFID, and some assumptions about how that population is distributed in terms of firm size;
- A report prepared by consultants Europe Economics seeking to quantify the benefits of MiFID - this report can be found at Annex 2 of the paper; and
- A survey of a sample of firms potentially directly affected by MiFID, seeking estimates of the overall cost impact of MiFID for them.
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