In its policy statement for the 2014-2019 EU term, the trade association said all regulation throughout the period should separate the two markets because their oppositional natures make them hard to group together.
“Retail and wholesale financial markets differ and require a different regulatory approach at EU level,” it said. “Consumers tend to purchase retail financial services from local advisers and may establish long-standing and trusted relationships with them.
“One result of such strong local ties is that companies find it difficult to develop large numbers of retail customers in other countries.
“The absence of a significant cross-border element in retail financial services raises a question about whether a single EU market in such services is achievable or desirable.”
It added that the retail financial sector would be best handled by national regulators familiar with the domestic context of their jurisdiction.
'Blunderbuss'
WMA deputy chief executive John Barass said that the body hoped to make legislation “rational” by ensuring that the distinction between wholesale and retail markets is not lost to all-encompassing regulation.
“Regulation must aim to hit specifically, it should not take a blunderbuss approach where everything is attacked,” he said.
“Professionals on the wholesale market need less detailed regulation; if regulators go into too much detail they will get in the way of business. Fund managers and brokers do not need protection from each other.
“Private investors need protection on retail markets to stop professionals from abusing information inequality against uninformed investors. This is not an issue in the wholesale markets.”
He added that while there will be some generic factors that remain the same throughout the markets, such as the need for relevant qualifications, the key differences more than justify the need for separate regulation.
“There are different structures, different products between the two, how can you produce one set of guidelines.”
He said that while the WMA has a long road of them in terms of getting their recommendations implemented, potential support from voters throughout the EU will make it a lot easier for them to achieve their goals.
“We have five years now, that is a lot of arguing and persuasion.”
Also stressed in the market distinction was the importance of recognising the differences between investment cultures in different member states. The body said consumers buy financial products based on the size, structure and common practice of their jurisdiction rather than seeing the EU as an universal market.
Directive over regulation
The WMA also recommended the employment of directives over regulations in the production of retail financial services law in order to allow national parliaments to bring consumer protection control closer to their people and markets.
It said that the “one-size-fits-all” solution provided by EU-wide regulation ill fits the divergence of business models across the area.
As a result of this, the body said directives are more suited to the task because they require EU legislation to be brought into effect by national parliament with local regulatory input, ensuring that interpretations are in line with domestic market practice and consumer knowledge.
Amongst its other recommendations are a review of retail consumer protection in EU financial services and a renewal of the EU’s commitment to the Financial Services Action Plan launched in 1999.
Earlier this month, the European Securities and Markets Authority (ESMA) began a consultation process to look at how best to implement the revised Markets in Financial Instruments Directive (MiFID II).
The consultation marks the first step in the translation of the directive into implementable rules and regulations.
MiFID II, which will not be fully implemented until 2016, will address the residual effects of the financial crisis by improving financial market transparency and strengthening investor protection within the insurance and investment market.
