French lender BNP Paribas (BNPP.PA) is merging two research teams in a development that could see the bank cut around a dozen jobs globally as it looks to comply with new European regulations, two sources told Reuters.
The move is the latest sign that global investment banks are starting to radically rethink their research franchises ahead of the January 2018 implementation of the so-called “MiFID II” rules which some analysts say could result in a 30 percent decline in global research spend.
BNP is merging its Markets Economics teams and Research & Strategy teams to form a single new team called Global Markets Research.
The restructure had put about a dozen jobs “at risk” globally, according to one source with direct knowledge of the matter. The bank had already begun to make redundancies in Asia, a second source with direct knowledge of the matter told Reuters.
BNP Paribas declined to comment.
The new MiFID II rules will prohibit banks from giving away research free to clients in return for trading commissions, which is typically the current practice, and investors will have to vet the quality of research and pay for it separately.
Giving away research free could be considered an inducement to do business which would create a conflict of interest for investors, regulators say.
The rules spell trouble for the banks because investors are unlikely to pay for much of the research currently produced, according to an August report by Hong Kong consultancy Quinlan & Associates, which estimates that global investment research spend could fall by as much as 30 percent by 2020 – putting pressure on headcount costs.
Greenwich Associates, a U.S. based financial markets consultancy, estimates research commission spending will fall by nearly $200 million (£156.59 million) in the United States and by over 100 million euros (£83.86 million) in Europe over the 12 months following MiFID’s implementation.
The new rules will require firms to classify research as independent or non-independent, but investors are less likely to pay for non-independent research, analysts say.
BNP’s new Global Markets Research team would be classified as non-independent although the bank will continue to provide independent research, the sources said.