Another important regulatory milestone fuelled the debate in 2017: the European reform package consisting of MiFID II and MiFIR , which – together with the PRIIPs Regulation – brought major changes to conduct regulation in the EU.

Greater transparency, better investor protection – five words give you the gist of what the second Markets in Financial Instruments Directive, MiFID II, alone spells out over hundreds of pages, summarised BaFin President Hufeld, assigning MiFID II to the regulatory super heavyweight division.

Too much of a good thing?

Conduct regulation was another area where the principles of proportionality and appropriateness had to be applied, emphasised the President. "If the new regulations presented an unreasonable burden or caused excessive collateral damage, nobody would benefit", he explained. But before labelling MiFID II "regulatory overkill" without proper reflection, he continued, we should consider two things:

• There has been an urgent need for action in the relatively recent area of conduct regulation. The new regulations are intended for a sector whose conduct in dealing with clients and in designing and distributing its products has by no means always been perfect. In terms of their approach, therefore, BaFin believes that the reforms are right. For example, MiFID II looks at the entire value chain, from product provider to client, with a view to strengthening its weakest link: the client. In BaFin's opinion, this is both necessary and the right thing to do.
• Only once MiFID II and other regulatory frameworks have been in use for a while can we assess what their effect really is – separately and taken as a whole. "I wouldn't be surprised if we also had to make a few subsequent adjustments to MiFID II", said Hufeld. There was a reason that a review of significant new provisions in the Directive had been scheduled – although this will not happen for another two years or so. "So let's see how things go." People who – based on hard facts – pointed out unintended side-effects that required further thought would always find a sympathetic ear at BaFin.

Sense of proportion in supervision

BaFin is aware that the implementation of two regulatory frameworks such as MiFID II and PRIIPs requires major effort. This is why it continues to apply the principle of "supervision with a sense of proportion", which stood it in good stead in the roll-out of previous comprehensive frameworks. President Hufeld: "If someone is seriously trying to implement new rules by the set deadline, but is unable to do so because of IT problems, for example, we won't bite their head off." But supervision with a sense of proportion does not give undertakings carte blanche to be careless in implementing MiFID II or apply some of the requirements half-heartedly.