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Banks are making a Mockery of a genuine attempt to Reform

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Banks are making a Mockery of a genuine attempt to Reform
« on: Jan 09, 2018, 08:52:25 am »
 

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The Independent


How the big banks are making a mockery of a genuine attempt to reform financial services
http://www.independent.co.uk/news/business/comment/midfid-ii-banks-financial-services-avoid-transparent-hide-charges-system-a8142151.html




'Across the City, the talk is of bargains to be had, of deals to be done at mind-bogglingly low prices.

I’m not referring to the January sales in the shops but in the amounts fund managers will be paying in future for analysts’ research. Under the new MiFID II legislation that came into force on 3 January, asset managers must now pay directly for research rather than have it combined with trading commissions.

The funds have indicated they will pay the so-called “unbundled” research cost themselves, out of their profit and loss accounts, rather than pass it on to clients. The result has been a price war as the mighty investment banks have scrambled to sign up the funds.

Some extraordinary tales of negotiations and outcomes are being bandied around: the investment bank that used to charge north of $500,000 for its services to one fund, that priced its research at little more than $100,000 in an opening gambit, only to come down still further, to less than $10,000; the massive bank that said an hour with one of its analysts could be worth up to $20,000 (£14,759) but is now prepared to charge less than a tenth of that, and in arrears, which presumably means if the research turns out to be rubbish the fund manager can just refuse to pay.

This, though, is research that costs millions of dollars to produce. So why the unbank-like rush of generosity?

The answer, of course, is that the large banks are being far from charitable: they’re keen to build market share, to hog the market, to price out of the industry the smaller players that do not have their vast resources and cannot weather these discounted price levels.'

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