The German Banking Industry Committee (Die Deutsche Kreditwirtschaft), which represents approximately 1,700 banks in Germany has published comments on the European Commission’s Capital Markets Union (Kapitalmarktunion) mid-term review. In principle, the German Banking Industry Committee welcomes the Commission’s intention to update and complete the Action Plan on Building a Capital Markets Union. It recommends a review of the existing regulation of the capital market as part of the introduction of future rules and regulations. The objective should be a set of regulations “all of a piece”, which avoids double regulation and inconsistencies (to the extent possible), and takes into account the cross-dependencies of financial market regulation.
The German Banking Committee highlights two examples where a single rule book has yet to become a reality (i) disclosure regime for issuers who wish to tap the capital markets and (ii) cost transparency disclosure rules under MiFID II and PRIIPs:
(i) The requirements, which currently apply at European level, are not adequately coordinated with one another. As a result, they impose an excessive burden on issuers while offering investors little added value. The various disclosure requirements under the First Company Law Directive (68/151/EEC, now 2009/101/EU), the Prospectus Directive (2003/71/EU), the Transparency Directive (2001/34/EU), the Market Abuse Regulation (596/2014) and the PRIIPs Regulation (1286/2014) impose an excessive burden on issuers while offering investors little added value. According to the German Banking Industry Committee harmonization across these directives and regulations is long overdue so that duplication and overlaps are eliminated and an appropriate level of investor protection can be established.
(ii) Another example is the cost transparency disclosure rules under MiFID II and PRIIPs. Thus, for example, the requirements for disclosing costs under MiFID II and PRIIPs are not harmonised. The German Banking Industry Committee criticizes that in many cases MiFID II regulations (Art. 25 (4) MiFID II, Art. 50 f. MiFID II DA) require distributors to inform their customers of costs inherent in the product. Since these costs are normally known only to the issuers, the distributors are unable to ascertain the costs inherent in the product or only with considerable effort. According to the German Banking Committee this appears to be unreasonable, not least because investors also receive information about these costs through the PRIIPs KIDs. A coherent regulation would have avoided this duplication of data on product costs. At the very least, however, it should have been ensured that any “double” cost information from the manufacturer / issuer and the distributor should be measured according to the same principles. This is also not the case with MiFID II and PRIIPs. Instead, cost calculation methods for PRIIPs and MiFID II can lead to different results. In fact, congruence could have been achieved without any great effort: for example by means of an opening clause allowing the standard addresses as an additional option to use the cost calculation method according to PRIIPs under MiFID II too. The German Banking Industry Committee demands that this should be taken into consideration for the future.