Implementation of MiFID II investor protection provisions by private banks within the European Union

Tom Loonen and Ronald Janssen

Journal of Financial Regulation and Compliance, 2022, vol. 31, issue 1, 1-15

Abstract: Purpose - With the introduction of the Markets in Financial Instruments Directive (MiFID), financial institutions are faced with many investor protection provisions; this has a major impact on the day-to-day operations of private banks, which provide investment services to predominately retail or non-professional investors. The purpose of this paper is to determine how MiFID provisions regarding investor protection with respect to suitability are complied with in practice by private banks. Design/methodology/approach - Based on interviews with 25 representatives of private banks from 10 different European Union (EU) member states, the researchers have determined how these provisions are fulfilled and associated risks mitigated. Mapping out the suitability requirements of MiFID and comparing them with how these have been operationalised, we arrive at the question of whether this leads to a level playing field and investor protection by different private banks. Findings - Although MiFID is trying to achieve a level playing field between the EU member states, this study shows that this has not been achieved in all areas. Investor protection requirements from MiFID are interpreted and operationalised differently. Although these differences are sometimes small, sometimes they are larger and affect the way the investor is served and suitability determined. Originality/value - This research provides a unique insight into the way private banks in Europe have implemented the MiFID II requirements and gives insight into best practices. For the future, this research can serve as a prelude to in-depth follow-up research on the implementation of EU provisions.

Keywords: MiFID; Private banks; European union; Investor protection; KYC; Effectiveness; Suitability; Investment (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-10-2021-0087

DOI: 10.1108/JFRC-10-2021-0087

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