A recent International Monetary Fund (IMF) report finds that EU member states need to take action on putting in place cross-border investment rules if they want to reap the benefits of an integrated, competitive financial market in Europe.
The IMF report states that meeting the November implementation deadline for the Markets in Financial Instruments Directive (MiFID), is the ”most pressing challenge for national authorities”. The report goes on to warn of the negative consequences of further delay, such as ”significant opportunity costs” and ”potentially damaging legal uncertainty for market participants”.
According to the IMF, a delay could also bring the so-called ‘Lamfalussy procedure’ into question, a process by which technical details of EU financial services regulation are left to sector-specific committees and where member states coordinate to ensure coherence in the application of EU law. The Commission is to review the Lamfalussy procedure in October 2007.
MiFID, which is set to overhaul European securities markets by fostering competition, increasing market efficiency and improving investor protection, was agreed by EU members in 2004. However, to date only eight member states (the UK, Romania, Ireland, Belgium, Germany, Denmark, France and Luxembourg) have introduced the new legislation, which should come into force by November 2007. Spain and Greece are expected to miss the deadline, according to a Commission overview.
On 24 April 2007, Internal Market Commissioner McCreevy had already called on member states to implement the MiFID directive so as not to miss the implementation deadline. Member states were asked to translate the directive into national law by January 2007, but the deadline was postponed until November 2007.
Meanwhile, a McKinsey report finds that more than half of the companies affected by MiFID rules will not be ready in time for the November deadline. The document judges that while in the short run, bankers and asset managers ”will be forced to work harder, perhaps for smaller profits”, those who adapt the new rules quickly are likely to have a ”first-mover advantage”.