German Regulators Expected To Endorse French Version Of MiFID II Unbundling


The German financial markets regulator does not intend to release its own consultation paper on MiFID II, according to market sources.  Instead it will be quietly endorsing the interpretation provided by French market regulators, further isolating UK financial market regulators.

Bundesanstalt für Finanzdienstleistungsaufsicht better known as BaFin, will not be publishing a consultation paper on MiFID II, unlike counterparts in France and the UK, according to Rudolf Siebel, head of Germany’s asset management trade association, Bundesverband Investment und Asset Management (BVI).

Germany has lagged the UK and France in adopting commission sharing agreements separating commissions into execution and research components.  Partly this is because of concerns that CSAs might subject research payments to value added tax, which in Germany is set at 19%.  Similar concerns apply to the research payment accounts outlined in Article 13 of MiFID II, in some cases prompting German asset managers to contemplate paying for research from their own P&L.  Allianz is said to be considering such a route.

It is also true that the German asset management industry is still more weighted to fixed income than equities.  Some sources estimate the cost of research at 5% of fixed income spreads, which might prompt asset managers to withhold 5% of the spreads for separate cash payments to dealers for research provided.

BaFin is thought to be supporting the French interpretation of MiFID II’s research unbundling provisions, which are less stringent than the version proposed by UK regulators.  German regulators were said to have supported French concerns with the original ESMA draft language pertaining to research unbundling, which the French felt went too far in banning the ability to use client commissions to fund research payments.

Unlike UK regulators, which intend to enforce research unbundling on collective investments such as unit trusts and hedge funds even though MiFID II only applies to separate accounts, BaFin has no such designs, according to Siebel.

Our Take

The German perspective is blunt: “The UK is out.”  As such, UK regulators will have less sway on their EU counterparts than they have previously enjoyed.  Just as Lord Hill had to resign his post post-Brexit as the most senior EU official regulating the European financial industry, so UK regulators must deal with a diminished EU role.  It is not clear that this has been fully grasped by the Financial Conduct Authority.


About Author

Sandy Bragg is a principal at Integrity Research Associates. He has over thirty years experience as an investment research professional. Prior to joining Integrity in 2006, he was an Executive Managing Director at Standard & Poors, managing S&P’s equity research business and fund information properties. Sandy has an MBA from New York University and BA from Williams College. Email:

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