European Securities and Markets Authority chairman Steven Maijoor has called on the EU to implement a total ban on commission under Mifid II.
Speaking at the British Bankers’ Association annual conference in London today, Maijoor said only a commission ban will prevent future misselling scandals.
ESMA is reponsible for ensuring financial stability and enhancing investor protection across the EU.
A Europe-wide commission ban is currently being debated in trialogue discussions over MIfid II between the European Commission, European Parliament and Council of Ministers.
At the Conservative party conference in Birmingham last week MEP Kay Swinburne blamed Labour for the failure to get agreement on a Europe-wide ban.
Maijoor said: “We do support the ban on inducements in certain situations as proposed by the European Commission in Mifid II. At a minimum we have to ban inducements in discretionary portfolio management and when an adviser wants to use the independent label.
“Getting the incentives right for providing good advice to clients is crucial. Getting poor incentives can not be solved just by corrective measures, internal controls and external supervision as too often it fails to get the required outcome. I hope the EU will follow some member states, including the UK, and move to ban inducements.
“I understand it will take some adjustment both on the industry and consumer side by moving to a new business model. Advisers and intermediaries have raised concerns about how a ban on commission may hurt their competitive position.”
Maijoor said commissions and sales incentives are “different sides of the same coin”.
He said: “Banks can recommend products they have originated therefore there are no explicit inducements involved but there can still be conflicts of interest. When offering a range of products banks may prefer their in-house products or those in-house products that have a higher return. We should not only look at inducements but also the remuneration of advisers and sales staff in financial institutions. Commission and remuneration are different sides of the same coin.”
This month, both Barclays and Co-operative Bank introduced new incentive systems based on customer service rather than sales targets.