EU Commission adopts the Consumer Financial Services Action Plan

In March 2017 the EU Commission published a Consumer Financial Services Action Plan: Better Products, More Choice, setting out the strategy for strengthening the EU financial market for retail financial services.

Despite retail financial services (e.g. bank accounts, credits, insurance) being part of our daily lives, and the extensive measures of harmonization taking place in recent years, research shows that retail financial markets are primarily national and that cross-border transactions are rare. The EU Commission believes that having access to financial services and products provided in another Member State would increase consumer choice and create better products. To this effect, it sees a major opportunity in the development of FinTech (the online provision of traditional and innovative financial services and products) on which it currently holds a public consultation (see our report here).

The Action Plan identified three main areas for further work:

• Increased consumer trust and empowered consumers for buying services both at home and in another Member State, supported by various measures, including reducing the fees for cross-border transactions and making the fees for currency conversion transparent, improve motor insurance products and facilitate the cross border provision of consumer credit.
• Reduced legal and regulatory obstacles for doing business abroad including working on common creditworthiness assessment criteria and facilitating the exchange of data between credit registers.
• Support the development of an innovative digital world the online provision of services being the key for developing the single market retail financial services and posing many challenges such as online customer identification and the regulation of the provision of innovative products,

The Action Plan builds on the Green Paper on retail financial services published in December 2015 with incorporating the results of the public consultation that has followed the Green Paper (see our post here and here),

The Action Plan puts forward a vision of a genuine technology enabled single market for retail financial services where no distinction is made between domestic and cross-border providers.

Addressing financial innovation: the launch of a New Task Force on Financial Technology

Last week the Commission has launched a Task Force on Financial Technology focusing on the FinTech sector (see the press release here). FinTeach refers to new applications, processes, products or business models in the financial services industry such as peer-to-peer lending and crowdfunding. The new Task Force brings together the expertise of the Commission staff in several areas including competition and consumer protection, financial and digital services and digital innovation and security. It will assess the state of the sector in the EU and develop strategies for addressing the potential challenges that this sector poses, in line with the Commission's goal to develop a comprehensive strategy on FinTech. The work of this Task Force is potentially very important for protecting consumers of financial services, given that FinTech challenges the 'traditional' consumer protection rules, including for example the definitions of a consumer and a creditor. The task force will engage with stakeholders and present policy recommendations in the first half of 2017. We will be anxiously waiting for this report.

The EU is a step closer to regulating financial benchmarks

Yesterday (28 April 2016) the EU Parliament approved by large majority the adoption of the proposed Regulation on financial benchmarks. The decision follows the political agreement reached by the Parliament and the Council in November 2015.

A benchmark is an index or indicator, calculated from a representative set of underlying data that is used as a reference price for financial instruments, financial contracts or to measure the performance of an investment fund. Well known examples of benchmarks are the LIBOR (London Interbank Offered Rate) and the EURIBOR (Euro Interbank Offered Rate). The EU Commission proposed the regulation of financial benchmarks in 2013, in the wake of the LIBOR-fixing scandal that shred light on shortcoming in the benchmark setting process and in the use of benchmarks.

The proposal has a significant consumer protection dimension, given that for example LIBOR is used for determining the price of mortgages and other consumer loans. The proposal aims to close the door for manipulation by subjecting benchmark administrators to prior authorization and on-going supervision; improving the governance of benchmark administrators (e.g. conflict of interest); requiring transparency in the benchmark setting process; and by ensuring supervision of critical benchmarks such as the EURIBOR and LIBOR.

The proposal now needs to be approved by the EU Council.