Legal Updates

 Financial RegulationDecember 11, 2023

CBI publishes findings of MiFID Costs and Charges review

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On 1 December 2023, the Central Bank of Ireland (CBI) issued a ‘Dear CEO’ letter (Letter) providing feedback to industry on the findings of its review of the application of the costs and charges disclosure requirements under MiFID.


In February 2022, ESMA launched a common supervisory action (CSA) with National Competent Authorities (NCAs) on the application of the MiFID costs and charges disclosure requirements, with a view to promoting consistent implementation of EU rules and enhancing investor protection.

The CSA was undertaken by 27 NCAs throughout the European Economic Area (EEA) and was guided by a common methodology and framework devised by ESMA.

The CBI’s participation in the CSA involved its completion of a thematic review (Thematic Review) which examined MiFID Investment Firms’ and Credit Institutions’ (Firms) application of the relevant costs and charges disclosure requirements.

The purpose of the CBI’s Letter is to provide feedback to Firms on its findings arising from the Thematic Review and to set out the CBI’s expectations of Firms in their application of the costs and charges disclosure requirements.

CBI Thematic Review

The CBI Thematic Review involved a combination of a desk-based review alongside inspections of Firms. The CBI’s findings were then submitted to ESMA and are reflected in the Public Statement issued by ESMA in July 2023 which includes the results of the CSA and outlines areas for improvement by Firms (ESMA’s Statement).

The CBI notes that the findings set out in ESMA’s Statement are consistent with the findings of the CBI’s Thematic Review and has advised that its Letter should be read in conjunction with ESMA’s Statement.

Key Findings of Thematic Review

The CBI notes that the CSA identifies a number of key investor protection weaknesses and the Letter sets out three principal findings, namely: (1) aggregated costs; (2) itemised breakdowns; and (3) third parties and third party payments.

In the schedule to the Letter, the CBI details each finding along with some good practices observed and its expectations. We consider each of the three findings below.

Aggregated Costs

The CBI observed Firms’ limited adoption of the ESMA format for the disclosure of aggregated costs, as set out in the MiFID Investor Protection Q&A at Q&A 9.13. The CBI expressed its concern in this regard as the standard format for the disclosure of aggregated costs aims to increase transparency and enable clients to easily compare costs and charges applied by different providers.

The CBI also noted a lack of transparency in Firms’ calculation of implicit costs when deviating from the PRIIPs methodology and, in certain instances, Firms’ exclusion of implicit costs from the aggregated disclosure statement.

Some Firms disclosed aggregated costs only as a cash amount and not as a percentage of the client’s investment, as required by Article 50(2) of the Delegated Regulation[1] and as outlined in the MiFID Investor Protection Q&A (at Q&A 9.4 and Q&A 9.13).

The CBI expects Firms to:

  • adopt the ESMA standard format when disclosing aggregated costs;
  • include implicit costs and detail on the method used to calculate implicit costs if an alternative method to the PRIIPs methodology is used;
  • display aggregated costs and charges as both a cash amount and as a percentage of client’s investment; and
  • meet their obligations with regard to ex-ante and ex-post costs and charges disclosures.

Itemised Breakdowns

The Thematic Review identified a lack of detail and granularity in itemised breakdowns. In some cases Firms’ provision of itemised breakdowns took the form of lengthy “transaction statements” that did not aggregate and itemise charges in accordance with the format of the itemised breakdown included in Annex II of the Delegated Regulation.

In other cases notification to clients in relation to their right to request itemised breakdowns were not sufficiently highlighted.

The CBI noted some good practices, including the use of a cost analysis tool to provide clients with detail on all implicit charges applicable to their accounts, including ‘explainers’ and definitions of charges.

In relation to itemised breakdowns, the CBI expects Firms to:

  • ensure that notification to clients of the right to request an itemised breakdown is clear and is placed in an adequately prominent position which minimises the effort required for the client to submit such requests;
  • provide an itemised breakdown at least at the level of the cost items set out in Annex II of the Delegated Regulation; and
  • clearly disclose implicit costs in the itemised breakdown.

Third Parties and Third Party Payments

The Thematic Review found that in some cases, Firms’ costs and charges disclosure functions are outsourced to third party providers with no oversight or monitoring of such disclosures. The CBI reminds Firms that the responsibility to issue costs and charges disclosures rests with the Firm itself and cannot be outsourced to third party providers.

The CBI also found that third party payments/inducements disclosures were not always effectively disclosed and itemised separately in the ex-post disclosure statement.

The CBI expects that Firms:

  • maintain robust oversight of any outsourcing of the process of issuing costs and charges disclosures;
  • disclose third party payments in the ex-post itemised disclosure statement either as a sub-category of the service costs or as a separate row; and
  • ensure that third party payments are clearly labelled as such.

Required Action

The CBI requests Firms to carry out a documented review of their costs and charges practices against ESMA’s Statement and the Letter. The review is required to include details of actions taken to address the findings and is required to be completed along with an action plan approved by the Board by 31 March 2024.

More generally, the CBI have outlined that it expects Firms to take “a more proactive approach to the continuous evaluation of the effectiveness of all its arrangements and practices, including those related to costs and charges disclosure requirements”.

The CBI warn Firms that failure to give due consideration to the Letter and ESMA’s Statement will be viewed unfavourably in the context of future supervisory engagement or the investigation of any breaches of the relevant regulatory requirements.


A copy of the Letter can be accessed here.

If you have any questions arising from this article, please get in touch with the Financial Regulation team or your usual contact in Dillon Eustace.

The author would like to thank Aoife Grugan for her contribution to this article.


[1] Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (Delegated Regulation).

DISCLAIMER: This document is for information purposes only and does not purport to represent legal advice. If you have any queries or would like further information relating to any of the above matters, please refer to the contacts above or your usual contact in Dillon Eustace.

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