After changes by chancellor George Osborne to the Bank of England financial services bill were introduced, the banking sector sighed in relief. The treasury got rid of the 'reverse burden of proof' section in the bill, which would have meant that senior managers needed to present their own evidence to prove innocence.

The bill, which will now affect the whole financial services sector, is expected to become active from early 2016. With London being the financial hub of the world, it is no wonder that the UK government's banking regulations are so closely watched. However, as the country is still part of the EU, international laws are creeping into the City, and banks better be ready for it.

The European Union has only recently let the drink dry on a bill called MiFID II, which, you guessed it, is replacing MiFID I. MiFID II (Markets in Financial Instruments Directive) will also apply to the whole financial services sector, and especially storing data and communication records is likely to be a challenge.

"Firms will need to start planning for the changes ahead of the finalisation of the EU implementing legislation," the Financial Conduct Authority is already alarming banks on its website. The piece of legislation was announced in early 2014, but the last amendments were made in September. MiFID is set to be active from January 2017, and there are concerns on whether banks are ready for it.

"MiFID II is a different structure than MiFID I," Robert Powell, global head of compliance at Etrali Trading Solutions, said. Where MiFID I was based on a voluntary basis, and served as advice rather than anything significant, the amended version will have a big impact on the sector

"It will encompass everybody and it has been agreed on a technical level so it's a totally different raft of legislation that was pushed through after the financial crisis in light of some of the things that happen like libor and the FX rates [rigging]," Powell said.

MiFID II demands stronger protection for investors and clients' assets from banks. As with any regulator urging for low-risk banking, the EU demands stronger protection for investor and clients' assets from banks with MiFID II. In addition, the legislation sets out clear rules regarding transparency of costs and charges for customers as well as the way a bank deals with bonds, derivatives and other non-equity instruments.

However, banks are thought to be more worried about the way their data is stored. MiFID II dedicates a tough section of its rules to the recording of conversations, which will see banks forced to record almost every interaction that could possibly lead to a transaction.

"If you look at the record-keeping requirement for most of the member states, they already have quite a lot of very very powerful rules in place to have the banks and financial organisations store data," Powell said. "This is a change that allows regulators to have that data stored for up to seven years. It also allows them to conduct monitoring surveillance and it requires banks to do so and that will have some interesting effects on the European traders."

Up until now, almost all banks outside of the UK and the EU have not been doing any monitoring surveillance because of the European surveillance act and its ramifications, according to Powell.

The stricter rules regarding transparency and customer service make MiFID II something banks have to prepare for, but the complete turnaround in terms of communications data storage might be their biggest challenge. They have until January 2017 to prepare and it unlikely to turn into a smooth ride.