More than one-fifth of European investment bank activity is likely to be significantly hurt by new MiFID II regulations, analysts estimated in a report published on Thursday.
Analysis firm Coalition said activities accounting for 20% of European banks’ corporate and investment banking revenues could see a negative impact of 5%-20% from the introduction of MiFID II. Another 1% of the revenues could see a hit of more than 20%.
Coalition said cash equities businesses will be the sector hardest hit by MiFID II, with revenues in that area potentially down by 15%, and some products within that sector affected even more. Fixed income, currencies and commodities activities could see revenues adversely affected by 4.2%, it said.
The new rules are expected to reduce overall EMEA CIB revenues by 2.6%, Coalition estimated. That is equivalent to US$4.4bn.
MiFID II rules will be introduced on January 3 with the aim of improving transparency and efficiency across European markets. But there is mounting concern they could disrupt trading and impose substantial extra compliance costs on banks.
Coalition said its estimates were based on all MiFID II changes being implemented over a 12-24 month period after the start date. Its estimates were based on analysis of 25 CIB products in EMEA, such as rates, FX, trade finance, equity and debt capital markets, and custody services.
Coalition estimated 29% of EMEA CIB activities will see a modest reduction in revenues of up to 5%, and there will be no impact on 44% of activities. It said 6% of activities could see revenues rise due to the new rules.