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By Tim Ferguson, 30 October 2007 10:30

NEWS

The UK banking industry is in good shape for the European MiFID regulations which come into force on 1 November, according to the Financial Services Authority (FSA).

MiFID - the Markets in Financial Instruments Directive - is a set of regulations that update how investment banks do business by improving record keeping and encouraging 'best execution' for trades, among other things.

Financial organisations have been working hard to get the necessary technology and processes in place - with total investment in the UK estimated to top £1bn.

An FSA spokesman told silicon.com that according to its MiFID monitoring programme, the 12,000 UK investment firms the regulation affects are well prepared.

Read more about how MiFID is shaking up the financial industry

♦ Cheat Sheet: MiFID
♦ MiFID: The unanswered questions
♦ FSA upgrades tech to improve MiFID monitoring
♦ MiFID compliance - regulators in the spotlight
♦ Barclays Capital prepares as MiFID looms
♦ Banks gang up for MiFID reporting

He said: "The industry is ready and indeed we're ready. Everything's been nailed down."

The FSA transposed MiFID into national law on 1 January this year and remains one of the few national regulators to have done so.

UK investment banks have therefore had plenty of time to work out how they'll approach the technology and process challenges posed by MiFID.

The spokesman said: "We've been ahead of the game all along. All the players have said 'we've got to do this' and are doing it."

The spokesman added, the process of preparing for MiFID has been challenging but said: "You've got to remember every challenge is an opportunity. By being so advanced we have opportunities in Europe."

But he said 1 November won't necessarily mark a dramatic change as many firms have been operating along MiFID lines for some time. "It's not like the world changes at midnight," he said.

The positive view of the FSA counters concerns some banks may not be able to cope with the record keeping aspect of MiFID - known as Article 51 - which requires financial organisations to retain details of trades for five years.

Discussing firms not fully compliant on 1 November, the spokesman said the FSA would encourage them to put the measures in place. As with any regulation, he said the FSA will first try to get firms to fix any problems.

But he added that if companies persistently fail to comply with MiFID, they could initially face private then public warnings from the FSA, which could escalate to fines or, in extreme cases, lead to the closure of a firm.

The FSA plans to launch a review of how the industry is complying with MiFID early in 2008 and will identify any changes that need to be made. It said: "Our hope is this won't go on too long."