Furthermore, banks must also comply with additional requirements, such as those on anti-money laundering and consumer protection. The new Markets in Financial Instrument Directive (MiFID2) will enhance consumer protection, but at the same time it will increase the burden of compliance. The benefits of these regulatory changes are clear: banks are safer than in the past.
At the same time, achieving pre-crisis profitability levels has become extremely challenging. Indeed, an industry with much lower risk levels should entail lower returns and cost of equity. To face these challenges banks need to take firm action to reduce costs and achieve efficiency gains. 18 Massive investments in information technologies and in human capital are necessary. Progress is ongoing on this front.