The European Commission retail financial services initiative comes at an important time as the removal of certain barriers can indeed boost cross-border financial business activity.
Important ways to achieve a more sophisticated European single market include: interoperability of e-identification tools, modernisation of certain AML-rules, simplification of information obligations, the provision of a clear framework on data flow and data storage as well as measures to foster digital inclusion.
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Updated: May 2016
One key measure to boost cross-border financial business is the provision of interoperable e-identity tools. The savings and retail banks in different Member States are currently working on making authentication tools more easily accessible for consumers. However, the possibilities in the countries differ very much due to national laws and the interpretation thereof. The Commission should focus on creating real interoperability of different national systems to manage electronic identities. A next step could also be establishing a European digital ID usable for all EU citizens throughout Europe when accessing services. Anti-money laundering (AML) rules should foresee that face-to-face identification can be complemented by other procedures that allow for distance identification.
Another challenge in cross-border business is the provision of complex product information in 24 official EU languages. European and national laws contain a confusing, ever-more-complex spider web of consumer-related information duties. On top of this, consumers can only make reasonable buying decisions if they receive easily understandable information and also read through it: consumers need to be able to actually process the data they receive. The traditional economic approach, which assumes that more information leads to better informed consumers, is therefore not so true anymore. As the Commission points out in its green paper, the provision of appropriate pre-contractual information to customers may be difficult, for instance, when mobile devices with small screens are used. ESBG thinks that information overload is an issue that needs to be tackled. Consumers need clear, simple and transparent information to make the best possible purchasing decisions. A first step in this direction can be to launch fitness checks and evaluations for the various European laws in the area of retail financial services.
European savings and retail banks see digitisation as a society-wide phenomenon which affects all sectors. Digitisation can help to overcome market obstacles such as far distances, it can help to provide easier access to know-how and it can be a tool to reduce costs. In this context, ESBG considers it essential that the same rules should apply to the same business with the same risks. Such equal treatment is key to healthy competition and to preventing any form of regulatory arbitrage. Currently, banks have to comply with much stricter rules than fintechs in areas such as customer identification and lending procedures. Of course, European legislation at the same time needs to be balanced so as not to stifle innovation. Clear rules are necessary when innovation is thwarted because a certain sector lacks sufficient legal certainty.
As a final remark, ESBG urges the European Commission to await the forthcoming national implementation of EU legislation such as the Mortgage Credit Directive (MCD), Payment Service Directive (PSD II), Payment Accounts Directive (PAD), Insurance Distribution Directive (IDD), Consumer Credit Directive (CCD), PRIIPs, KIDs and MiFID II and evaluate their effects before bringing up any new proposals in these areas.
The initiative of the European Commission in the area of retail financial services comes at an important time. ESBG believes that the removal of certain barriers can indeed boost cross-border financial business. The interoperability of e-identification tools, AML-rules that consider digitisation, simplification of information obligations, and the provision of a clear framework on data flow and data storage as well as measures to foster digital inclusion are important ingredients to achieve a more sophisticated European single market.
The European Commission published in December 2016 a green paper on retail financial services. That paper aims to assess the regulatory framework for retail financial products with a particular focus on cross-border sale and digitisation. The deadline for the submission of a response was 18 March 2016. The Commission is currently assessing the responses to the paper and were to decide upon the follow-up actions in the summer.