Q: Does Poland guarantee financial security?
A: If I understand you correctly, you mean safety guarantees for customers on the financial instruments market. Yes, our market is safe, however so far appropriate authorities have been very specific in their regulations for brokerages. For example, account holders ought to know about movements on their accounts, hence the regulations are very detailed about what printouts and on what occasions a brokerage’s IT system should produce.
The EU’s Markets in Financial Instruments Directive (MiFID) approaches this quite differently – it outlines the goals to be attained, but leaves decisions about the means by which they are to be met up to brokerages.
Q: What does this change for brokerages and customers?
A: It will certainly be a big challenge, but I’m certain investment firms will prove up to the task as by now they are quite abreast of the European market. I’m also quite sure this will prove no problem for our clients – on the contrary, the Directive will help us meet their constantly rising demands. Let us also remember, that this will be a major challenge for the regulatory authorities, which will have to change the way they monitor the financial market. To put it simply, finance market monitoring was easier before the Directive as in many cases you only had to follow the control procedures step by step in keeping with the enforcement regulations. The regulatory body reacted only if something was missing – say a signature. This meant that “something” was wrong and it was entered into the post-control comments.
Now the regulatory authorities will have to delve deeper into such cases, and this requires broad knowledge, meticulousness is not enough.
Q: At the moment we have two regulatory bodies – financial and banking. In keeping with current financial supervision legislation they are to merge from January, 1 2008. What do you think about the move?
A: There is nothing unusual in two regulatory authorities – many countries have two. In some there is specialized supervision, in an equally sizeable group of countries regulatory bodies have been consolidated into one authority. And we could debate about which solution is best until the morning hours. Such bodies must be efficient and only this counts for brokerages and their clients. It is really a minor issue if security is in the hands of one, two or more institutions. European law does not prescribe any specific structure model for such bodies, only effects count. In keeping with European directives all financial markets must be safe – not only the financial instruments market but also insurers and banks.
Especially important for the capital market today is the introduction of European law in two areas: one set of directives, shortnamed MiFID, regulates stockbroker services, the second, called CAD, regulates the capital requirements of financial institutions. What is new in these Directives? The MiFID rulings among others specify organizational requirements for investment companies, their customer information duties and transaction procedures, while the CAD directives introduce new risk and capital assessment criteria for brokerage houses.
All these regulations were to be included in our legislation in January of this year and I don’t know why our government failed to keep this deadline. Now it looks as if they will come in at a later date and it is difficult to say when. Hopefully soon.