Consumer Panel members recently went to Brussels to meet with some EU decision-makers, including MEPs, the European Commission’s new financial services directorate; and partner organisations such as BEUC, Better Finance and Finance Watch.
With so much financial services regulation coming from Brussels, we need to get our views on consumer protection heard by those involved in the making of Europe’s laws and regulations. We talked about the need to get better consumer representation in EU decision-making, as well as more technical issues related to investor protection under MiFID II and the Capital Markets Union initiative.
The European Commission has recently unveiled its proposals for “Better Regulation” at EU-level. This is welcome, but it is important that ‘better’ does not become synonymous with ‘light-touch’. The industry is now praying in aid of competitiveness to demand that financial regulators go easy on it.
Stopping product mis-selling, cleaning up LIBOR or forex rigging, or getting bankers to take responsibility for their actions do not amount to ‘banker bashing’ as some would have it. Banks should always remember who bailed them out in the crisis. A well-regulated industry should help competitiveness, not hinder it.
The current EU drive to cut red tape and boost competitiveness risks diluting consumer protection. The Capital Markets Union Green Paper did not contain any specific proposals for substantive safeguards for retail investors who are being targeted as new sources of capital for investment, including in risky and illiquid vehicles such as ELTIFs.
ELTIFs, a new type of fund, will not normally offer investors the possibility of early redemption of their units or shares. Given these limited redemption opportunities, it is important that investors understand the illiquid nature of the investment.
The Panel will be working to ensure that the next stages of the CMU plans cover this angle effectively. In particular, we believe an EU-wide investor compensation scheme – previously abandoned as “too difficult” – is the minimum necessary to boost consumer confidence. We have also urged the Commission to undertake thorough consumer testing of its proposals, and we will reiterate the point for better EU consumer research more broadly when the retail financial services Green Paper is published later in the year.
Sensible regulation requires input from all affected stakeholders, and consumer representation in Brussels remains woefully inadequate. Our own research has shown that financial services industry lobbyists outnumber consumer representatives in Brussels by 700 to one.
The Commission has recently said that consumer groups do not always accept invitations to join the many expert groups which advise the EU on new policy initiatives. It is important to realise that this reluctance is not based on an unwillingness to engage: consumer groups simply do not have the financial and technical resources to muster the kind of lobbying that the industry can fund so easily.
This problem is compounded by the EU’s use of arcane and opaque decision-making processes, which are inaccessible to most consumer and civil society groups. Laws are finalised in closed sessions called ‘trilogues’. This means deals are made behind closed doors without stakeholder consultation or impact assessments. This practice needs to stop in order for the EU to operate transparently, restoring accountability for the laws that it creates.
The Panel, as one of the few consumer groups across Europe specialising in financial services, will continue to engage with EU policy-makers to work towards a fairer representation of the consumer viewpoint.
You can read more about the Panel’s priorities at EU-level on our website.