The controversial ban on commissions to distributors of financial and investment products, particularly rejected by the German banking industry, will not be enshrined in European law in the foreseeable future. This is because the Economic and Monetary Affairs Committee of the EU Parliament voted on Wednesday evening against such a ban on inducements. Members voted with a clear majority for a common position for the final negotiations with the Council on the so-called EU retail investor strategy, which no longer includes the prohibition of commissions, unlike the original proposal by the EU Commission. As there is currently reportedly a majority of EU member states in the Council against a ban on commissions, it is highly unlikely that the EU retail investor strategy will ultimately include a prohibition of inducements.

Last year, EU Commissioner Mairead McGuinness proposed the legislative package, which includes amendments to a whole range of EU directives and regulations, including the EU Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive (IDD). The declared objective of the EU Commissioner was to „enable retail investors to make investment decisions that meet their needs and preferences, and to ensure that they are treated fairly and are adequately protected.“ For this purpose, the EU Commission also targeted the commissions received by financial advisers and product sellers. For example in banks, when they promote products from a particular provider to the customer. According to the EU Commission, the practice of commission-based distribution results in „retail investors opting for more expensive or less efficient investment products.“ However, from the outset, McGuinness refrained from wanting to ban commissions altogether. Anticipating resistance in the EU Parliament and Council, the Irishwoman limited the proposal to banning inducements for execution-only transactions.

But even this proposal was met with considerable opposition in the financial industry – because this challenged a common distribution practice in many EU countries, and because the banking industry was concerned that a partial ban on commissions could be a precursor to a blanket prohibition. Against this backdrop, the leading member of the European Parliament on this issue, Stephanie Yon-Courtin from the liberal Renew Europe political group, sought to remove the partial ban on commissions from the text that the EU Parliament intends to bring to the final discussions with the Council.

Against this backdrop, Stephanie Yon-Courtin, the Member of the European Parliament leading on this dossier from the liberal political family „Renew Europe“, sought to remove the partial ban on commissions from the text that the EU Parliament wants to take into the final negotiations with the Council. Subsequently, Social Democrats and Greens formulated a counterproposal, which failed on Wednesday evening, while Yon-Courtin's compromise texts were adopted.

Even though the EU Parliament would now be able to start the trilogue with the national governments, there will be no further negotiations before the European elections – especially since the Council has not yet coordinated its starting position for these discussions, known as the „General Approach.“ As per the plans of the Belgian EU Council Presidency, this is expected to happen in June. After the European elections, however, the EU Parliament will not have to start from scratch but can – assuming a corresponding decision by the Presidents – build on the starting position solidified on Wednesday and begin negotiations with the Council in the autumn on this basis. Whether these negotiations will still be led by Yon-Courtin depends on the results of the European elections.