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Response to Retail Green Paper Consultation

Doc 0116/2016                                                                                                          18/03/2016

Vers. 1. 4                                                                                                                    NLI

 

ESBG RESPONSE


Green Paper on retail financial services: better products, more choice, and greater opportunities for consumers and businesses

 



1A. For which financial products could improved cross-border supply increase competition on national markets in terms of better choice and price?​

Please tick all relevant boxes


Current accounts
Saving accounts
Mortgage credit
Consumer lending
Payment services (e.g. mobile payments)
Car insurance
Life insurance
Private health insurance
Saving and investment products
XOther
Don't know / no opinion / not relevant

 

Please specify which other financial products would you be most interested to buy cross-border from other Member States if they suited your needs better than products available on your local market:


ESBG observes a high level of diversity in the structure of the different European savings and retail banking systems and their core business models. While some ESBG members are selling products cross-border or contemplating doing so, others only get active within regional markets. Due to low potential demand and high costs for risk management and operational procedures as well as compliance costs, it is a challenge for banks to develop valuable business models for the cross-border sale of products. For banks having a physical presence in a market usually is imperative. In addition, some national markets already show a high level of competition with regards to the offer and comparability of financial products. There is a risk of oversaturating these markets. Markets in which ESBG still sees good opportunities for business development are those in which either bank account penetration still is rather low or where consumers do not have access to a sufficient choice of products. Thus, an in-depth analysis of the particular Member State is needed as it is rather difficult to give an answer for all European markets without considering the national situations.


Apart from those challenges, ESBG thinks that the European Commission should 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 its effects before bringing up any new proposals in the area of those products. For instance, the bank account mobility has just been increased by the transposition of the PAD into national laws. The impact of these provisions needs to be assessed. The review of the PAD is scheduled in the Directive for 2019.


Finally, ESBG would like to point out that further facilitating the switching of financial service providers should be the last step on the way to a real European single market. Before any such complex and likely costly system is established the demand should be clarified and the equivalent products and services should be available on the market.

 



2A. What are the barriers which prevent firms from directly providing financial services cross-border?


​XLanguage
​XDifferences in national legislation
​XAdditional requirements imposed by national regulators
​XImpossibility of verifying the identity of cross-border customers
​XLack of knowledge of other markets
​XCost of servicing clients cross-border (without local infrastructure)
​XNo EU passport available
X​Other
Don't know / no opinion / not relevant


Please specify what other barriers prevent firms from directly providing financial services cross-border:


The savings and retail banks traditionally have their core business in regional markets.. Regarding those members that get active cross-border, a physical presence (branch) in the target market is often considered as indispensable. A physical branch is needed to understand the cultural specifics of the Member State, the local market, regulatory practices and, not least, to create customer trust. Many customers still consider a physical presence as a measure of soundness, confidence and continuity. Banks need to comply with risk management policies when entering a new cross-border markets. Thus, for the moment - and as long as setting up branches is still considered a necessity - costs increase whenever a banks get active in a cross-border market without any local infrastructure.


A major obstacle to creating a real single market for financial products and services in the EU is the differences in language (24 official languages using three alphabets - Latin, Greek and Cyrillic). It is not news that this increases the costs of setting up cross-border businesses considerably. Here boosting automated translation services and the underlying digital infrastructure could help to remove market obstacles. Currently, automated translations tools are not (yet) sophisticated enough to be used in this regard.

Beside that barriers can be:

1. Member States' gold-plating of European Directives:

- One example is the implementation of the Mortgage Credit Directive (MCD) in France and Germany. France is the only country that requires a quota of 60 training hours for their new sales representatives. In Germany additional information requirements for granted overdrafts (§ 504 German Civil Code) and tolerated overdrafts (§ 505 German Civil Code) have been implemented, which exceed the original scope of the MCD.

2. Legislation which does not keep pace with digital development can create obstacles, when existing pieces of law do not consider the provision of emerging technologies. Thus, ESBG observes, in parts, a lack of clarity in what is prudent and what is not.

- The national implementation of EU laws can suffocate cross-border flexibility such as the requirements for client signatures under the Deposit Guarantee Scheme Directive (DGS) which cannot be fulfilled electronically.

3.  Diverging national laws or differences in views of national authorities:

- Even with the implementation of the MCD a mortgage credit will not be subject to the same regulations throughout Europe. In view of risk analysis and creditworthiness assessment, different national standards - from the documents needed to assessment criteria - create barriers to cross-border activities.

- National tax law requirements which differ considerably throughout the Member States add complexity.

- Different European currencies (nine additional currencies beside the Euro) are adding complexity and causing additional costs for any cross-border activities in the whole of Europe.

- Cloud technology is treated differently by national authorities in the Member States. ESBG observes differences in particular as to how the authorities assess the question of liability. The savings and retail banks reported that whenever the issue of liability is discussed in advance with national authorities, the financial responsibilities often remain unclear. Consequently, banks' compliance departments often need to classify the use of the cloud as too risky.

- Regarding the verification of cross-border customers, ESBG would like to stress that it is not always impossible to verify the identity of cross-border customers. It is, however, a challenge for financial institutions to do so while at the same time fulfilling the legal requirements (data privacy, anti-money laundering (AML) and know-your-customer (KYI) rules).

- KYC processes and the documents required to fulfil those differ throughout Europe which complicates the everyday life of citizens and hinders digitalisation. Standardising the authorization process across Europe could simplify the provision of digital services.

- National requirements for e-identification procedures vary throughout the Member States. While some national regulators such as Germany accept video identification, in other Member States those tools cannot be used (e.g. Austria, Italy, and France). An interoperability framework could help in this regard. There is a need for legal European harmonisation that could be reached by leveraging the Regulation on electronic identification and trust services for electronic transactions in the internal market (eiDAS).

4. Cultural differences:-Apart from diverging legislation, national approaches in practice can differ considerably throughout the Member States due to a varying embedded cultural understanding. 

- For example, in the UK charging fees for financial advice is normal, however, such a practice is unknown (and likely difficult to accept from a customer point of view) in other Member States such as France.




3. Can any of thes​e barriers be overcome in the future by digitalisation and innovation in the FinTech sector?​​


​X​Yes
No
Don't know / no opinion / not relevant

 



3.1

 Please specify which of these barriers can be overcome in the future by digitalisation and innovation in the FinTech sector:

Please tick all relevant boxes


Language
 Territorial restrictions (e.g. geo-blocking, residence requirement)
 Differences in national legislation
 Additional requirements imposed by national regulators
XImpossibility of verifying the identity of potential cross-border clients
 Lack of knowledge of other markets
 Lack of knowledge of the offer of products in another Member State
 Lack of knowledge of redress procedures in another Member State

Cost of servicing clients cross-border (without local infrastructure)
 No EU passport available
XOther
 Don't know / no opinion / not relevant


Please specify which of these barriers can be overcome in the future by digitalisation and innovation in the FinTech sector:

First of all, ESBG feels the need to underline that innovation is not limited to the so called fintech sector. Digitalisation is a society wide development. Innovative developments affect and transform multiple sectors. Digitalisation can help to overcome markets obstacles such as far distances, it can help to provide easier access to know-how and it can be a tool to reduce costs. Against this background, ESBG thinks that the same rules should apply to the same business with the same risks. Such equal treatment is key to ensuring a level playing field, fostering 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 lending procedures and customer identification (e. g. financial institutions need to consider AML and KYI-rules while the same rules are not applicable to non-financial new entrants offering financial services or fintechs). Of course, at the same time, innovation should not be stifled by a too rigid regulatory framework.

Whether current barriers can be overcome by digitalisation and innovation also depends on the legislator. It should not be forgotten that innovation can be hindered by a lack of harmonisation which then can also have an impact on a level playing field. Some areas in which ESBG observed inconsistencies and incoherencies (or the risk thereof) are: (1) a varied approach of national authorities to the usage of the cloud; (2) a fragmented approach in Member States to fighting cybercrime;(3) varying willingness of Member States to fulfil the shift to e-government; (4) Differences in national laws regarding which e-identification tools can be used.

Apart from those more general obstacles that need to be overcome, ESBG thinks that in the financial sector digitalisation and innovation can help to facilitate the remote knowledge of the consumer (remote KYC and remote contract signature). Big data developments are a tool to improving the customer experience by offering more sophisticated tailor-made services. More sophisticated automated translation tools will ease the provision of cross-border financial services.




4. What can be done to ensure that digitalisation of financial services does not result in increased financial exclusion, in particular of those digitally illiterate?​

Please tick all relevant boxes


X​Improved access to digital means
Digital training offered by the financial industry
​XDigital training offered by NGOs
​XDigital training offered by public authorities
​XOther
Don't know / no opinion / not relevant

 

Please specify what else can be done to ensure that digitalisation of financial services does not result in increased financial exclusion, in particular of those digitally illiterate:


The savings and retail banks traditionally follow a socially responsible approach to business and aim at bringing about a return to their societal roots. It should be noted that most financial education programmes carried out by ESBG members already take into account the digital dimension to help citizens (including customers) to get acquainted with those tools.

Meanwhile, to fight financial exclusion with regard to digitalisation, ESBG thinks that the Commission could carry out a survey to assess and analyse existing national rules. Special attention should be paid to the precise effects of the different rules on the actual financial know-how of the customer. In addition, national specifics, such as an existing advisory market and early learning programmes (e.g. at school), should be included in the assessment. Finally, with the result of the survey, best practices for the finance industry could be developed.

Further mechanisms necessary to avoid financial exclusion are an investment in digital infrastructure, such as high-speed broadband, and an awareness campaign to promote internet usage. Every EU citizen should be able to get online and navigate the internet. By doing so, wider social issues can also be addressed such as supporting economic growth and helping to close equality gaps.

Not only digitally illiterate consumers but also those seeking personal advice and consultation are at risk of being excluded. In many Member States the consumers of the savings and retail banks still expect their bank to be physically present, even if by a limited network of branches. Against this background, ESBG thinks that digitalisation of financial services is an important aspect but rather by adding additional communication channels than replacing all existing more traditional means of communication.   

 



​​5. What should be our approach if​​ the opportunities presented by the growth and spread of digital technologies give rise to new consumer protection risks?

It is important that the Commission keeps up to date regarding emerging digital technologies and constantly evolving risks. All stakeholders bear the common responsibility regarding the assets that they have been handed or to which they have access.  If emerging business models bear considerable risk for consumers, clear rules are needed to ensure a common level of consumer protection. If this is the case, the same rules should apply to the same business with the same risks. It is essential that regulation in this context reflects the principle of proportionality. Proportionality refers not only to the nature, scale and complexity of a business, but it also means taking into account the concrete risk situation a particular company faces and the likely quality of their risk management. Moreover, the legislator should pursue making regulation as technology neutral as possible to avoid the need for constant adaptation of legislation whenever new technologies emerge.

A "regulatory sandbox", a project the Financial Conduct Authority in the UK recently started, could also serve as a new way of investigating regulatory consequences. Important in this regard is that such a sandbox would be available for all market participants from start-ups to fintechs and traditional players. In addition, the approach with the regulatory sandbox should not lead to regulatory arbitrage. In the end, the same rules should apply to the same business with the same risks.

Some more comments on specific areas and the assessment of risk:

- Crowdfunding/crowd investing: Crowd financing is an instrument that bears specific risks such as fraud and liquidity exposure. For consumers it is essential to ensure that investment products are fair, clear and not misleading. Such rules should include a clear definition of crowdfunding/crowd investing, along with investor protection provisions, consumer protection rules, platform licensing and supervision by financial authorities. Other relevant aspects are the necessary pre-contractual information, cross border provision of such services, and the introduction of quality labels and codes of conduct. Appropriate and proportionate rules that do not suffocate progress would safeguard the advantages crowdfunding platforms have, foster innovation and enable competition.

- An important point to tackle is the storage of client data within Europe. ESBG thinks that a clear legal framework regarding the location of data can help to protect business confidence and boost consumer trust. Trust is created by transparency. The security of data is a key point for consumers. For reasons of data protection, personal data should be stored within Europe. By storing the data of their citizens in Europe, the EU can stay independent in the use of their citizens' data. This also makes sense from a public security point of view.




​​ 6. Do customers have access to safe, simple and understandable financial products throughout the European Union?

 

​XYes
No
Don't know / no opinion / not relevant

 

Please explain your answer to question 6:​


Customers in Europe have access to safe, simple and easily understandable financial products such as current accounts, savings accounts and custody accounts. The Payments Account Directive will also provide the customer with a right to a basic bank account, which must be enshrined in national law across Europe by September 2016.


Furthermore, customers have access to payment instruments (EUR) that can be and are used throughout Europe: SEPA Credit Transfers (SCT), SEPA Direct Debits (SDD) and payment cards (prepaid, debit and credit withdrawals). The use of debit instruments can be limited where creditors have no sufficient means to ascertain the credit standing of prospective payees.

 



7. Is the quality of enforcement of EU retail financial services legislation across the EU a problem for consumer trust and market integration?

​XYes
No
Don't know / no opinion / not relevant

 

Please explain your answer to question 7:


ESBG thinks that the Commission could do more to enforce existing legislation. One example is the Single Euro Payments Area (SEPA) Regulation which has been in force since 1 August 2014. However, against the rules being set in the regulation, it is still common that utility companies do not support SEPA payments.


In the wider context, problems are also arising through Member State's gold-plating. An example being the implementation of the Mortgage Credit Directive in France and Germany. In more detail: France is the only country that requires a quota of 60 training hours for the new sales representatives. In Germany additional information requirements for granted overdrafts (§ 504 German Civil Code) and tolerated overdrafts (§ 505 German Civil Code) have been implemented, which exceed the original scope of the MCD. This should be in line with the Commission's recently formulated invitation to the European Parliament and Council to, "urge Member States to avoid unjustified "gold plating" of EU rules when transposing them into national law. While this may help in achieving the legislation's objectives in the local context or aim to deliver greater benefits, it may also impose significant extra burdens. Member States should be invited to explain the reasons for any such "gold-plating" (Commission press release as of 19 May 2015).


In this regard, ESBG calls the Commission to also influence national authorities for starting the implementation process of directives early enough. Only by doing so can it be ensured that an exchange between national authorities, consumer protection bodies and the industry can take place in advance and that an adequate time is left to implement the respective measure.




8. Is there other evidence to be considered or are there other developments that need to be taken into account in relation to cross-border competition and choice in retail financial services?


Regarding online customer surveys, an accreditation process is needed. There should be a controlling process that the person who gives an opinion on a financial service/product has also bought and used the respective product on his/her own. Otherwise, online customer surveys might contain misleading and incorrect information.




9. What would be the most appropriate channel to raise consumer awareness about the different retail financial services and insurance products available throughout the Union?

​Please tick all relevant boxes


​​Independent pan-European comparison websites, including the information on cross-border products
​XInformation campaigns by regulators
Information campaigns by consumer organisations
Marketing campaigns by financial services providers or their associations
Financial intermediaries empowered to offer cross-border financial products
​XOther
Don't know / no opinion / not relevant

 

​​Please specify what other channel would be the most appropriate to raise consumer awareness about the diff​erent retail financial services and insurance products available throughout the Union:


Further channels that can be, and are already, used to raise consumer awareness are personal consultations with banks' financial advisers, mobile platforms as well as intermediary platforms.


Regarding comparison sites, ESBG would like to point out that comparisons of financial products are only useful if those products can be highly standardised or the comparison only refers to the basic characteristics (minimum information). The language barrier is another important issue to consider in this regard (24 official EU languages and three alphabets).In addition, product and service comparability would have to take into account cultural differences and diverging national laws. ESBG would appreciate if the European institutions could foster the development of a European register of comparison sites, offering a (quality based) ranking of such sites. One important point in this regard would be ensuring the independence and impartiality of such sites.



10. What more can be done to facilitate cross-border distribution of financial products through intermediaries?


ESBG thinks that each financial institution should be free to decide if they want to use intermediaries for the cross-border distribution of their financial products. The reason being that this is a business decision which also has a competitive impact. At the same time, European legislation should generally offer banks the chance to use intermediaries for the cross-border distribution of financial products, if the bank decides to do so. Above that, ESBG thinks that financial institutions and intermediaries should be subject to the same regulatory requirements to avoid any distortion of competition. An idea to facilitate cross-border work with intermediaries could be to develop a system which rewards those suppliers that have fulfilled the requirements on minimum information and independence.




11. Is further action necessary to encourage comparability and / or facilitate switching to retail financial services from providers located either in the same or another Member State?


Yes, at Member State level
Yes, at EU level
​XNo
Don't know / no opinion / not relevant

 



12. What more can be done at the EU level to tackle the problem of excessive fees charged for cross-border payments (e.g. credit transfers) involving different currencies in the EU?

Please tick all relevant boxes


Aligning cross-border and domestic fees
Before every transaction, consumers should be clearly informed what fee they will be charged and for comparison should be presented the fee for national payment
Before every transaction consumers should explicitly accept the fee they will be charged
No further action is needed
​XOther
Don't know / no opinion / not relevant

Please specify what else can be done at the EU level to tackle the problem of excessive fees charged for cross-border payments (e.g. credit transfers) involving different currencies in the EU:


ESBG considers the use of the wording "excessive fees" without any common definition or market study to be inappropriate. The Commission should first assess what kind of "excessive fees" have actually been charged for cross-border payments and who charged those fees (merchants, PSP, TPPs) and if this is a proven pan-European issue. If this proves to be an issue, the proper enforcement of existing legislation should be looked at and the implementation of the PSD II and PAD should be awaited before initiating any further actions in this regard. Additionally, in the area of foreign exchange services, recently several new market entrants have emerged and are competing with existing players. Thus, any issue of "excessive fees" will also be influenced by the dynamics of customers' supply and demand. In a market-driven economy such as the EU businesses produce "better products" in response to the expectations and behaviour of their customers.


With the introduction of the Single Euro Payments Area (SEPA), all cross-border SEPA Euro payments within the Union have been shifted to and are processed in new banking systems fulfilling the legal requirements of the SEPA regulation. As a consequence, the remaining cross-border payment transactions like third country payments and foreign currency transactions are processed continuously in the "traditional" systems but with a rather low transaction volume and rather high AML requirements. This business can, considering the legal requirements, the low transaction volumes, the unitary processing (against SEPA mass payments processing), and the stronger controls and, therefore, higher processing costs not compete with the retail SEPA payment transactions. ESBG asks the Commission to consider this for any action on EU level in order to avoid a negative impact on the future availability of those payment services for consumers.

 



13. In addition to already existing disclosure requirements*, are there any further actions needed to ensure that consumers know what currency conversion fees they are being charged when they make cross-border transactions?


Please tick all relevant boxes

No further action is needed
Before every transaction, consumers should be clearly informed what conversion fee they will be charged and for comparison should be presented the average market conversion fee (e.g. provided by the European Central Bank)
Before every transaction consumers should explicitly accept the conversion fee they will be charged
​XOther
Don't know / no opinion / not relevant

Please specify what further actions are needed to ensure that consumers know what currency conversion fees they are being charged when they make cross-border transactions:


As numerous disclosure and information requirements already exist, ESBG calls the European Commission to concentrate on the enforcement of existing regulation. For instance, the Payment Services Directives requires payment service providers to disclose the currency conversion the payment is based upon. If needed, it should be controlled by the Member States whether those legal requirements are met, for instance in dynamic currency conversion scenarios.




14. What can be done to limit unjustified discrimination on the grounds of residence in the retail financial sector including insurance?


Above all, ESBG would like to clarify that applying existing rules with regard to residents and non-residents and customer risk policies does not constitute unjustified discrimination.

For instance, banks use geo-blocking technologies to fulfil various legal requirements (e.g. differing pre-contractual information duties in the Member States). ESBG would also like the Commission to take note that geo-blocking in certain cases is needed to protect the customer from fraud. For examples, in some Member States geo-blocking is an anti-fraud method used in the financial services sector. Geo-blocking is an effective tool to combat the misuse of cards. It can effectively filter out cards that have been used in a way (meaning at a geographical place) that raises suspicion. This helps the financial services industry to significantly reduce losses incurred by the use of skimmed cards abroad. The use of geo-blocking to avoid fraud needs to be considered if the European Commission designs rules that could hinder this practice. However, there are also areas where the traditional way of offering services will not be replaced but supplemented by digital channels. 

The application of the strong Know-Your-Customer (KYC) rules, however, can lead to discrimination. In this regard, a first step could be to identify situations in which the place of residence might be negligible as criteria. In this context, ESBG would like to point out that some national laws justify different treatment of customers concerning their place of residence. Thus, this is also a necessity for those banks, which do not want or are not able to offer cross-border financial services. Anti-money laundering rules should be modified and the face-to-face identification should be complemented by procedures that allow for distance identification.




15. What can be done at the EU level to facilitate the portability of retail financial products – for example, life insurance and private health insurance?

Please tick all relevant boxes


Prohibit insurance firms from geographically limiting cover to the country where the policy-holder is living
Encourage insurance firm to sell insurance products with wide geographical coverage
​XOther
Don't know / no opinion / not relevant


Please specify what else can be done at the EU level to facilitate the portability of retail financial products:


ESBG has identified two aspects in this regard:

- Harmonisation of European taxation;

- And the creation of a European-wide additional health insurance system for supplemental health policies.

Moreover, with regard to account number portability mentioned in the Commission Green Paper, ESBG would like to bring to the Commission's attention a French report from 22 December 2014 issued by Ms Mercereau, officer of the Court of Auditors. This report focuses on the technical and operational feasibility of bank account number portability. Apart from that ESBG asks the Commission to consider that account number portability is not related to the portability of a product but to the portability of the identifier. ESBG is not aware of any market study even suggesting that with respect to bank accounts fostering identifier portability would be needed to achieve product portability.




16. What can be done at the EU level to facilitate access for service providers to mandatory professional indemnity insurance and its cross-border recognition?


ESBG thinks that a harmonisation of the requirements for coverages and caps would facilitate cross-border recognition.




17. Is further action at the EU level needed to improve the transparency and comparability of financial products (particularly by means of digital solutions) to strengthen consumer trust?


Yes
​XNo
Don't know / no opinion / not relevant

 

Please explain your answer to question 17:


Many new legislative acts aimed at improving the distribution of useful, transparent and comparable information have recently been adopted (MCD, CCD, PAD, MiFID II, PRIIPs or IDD). These pieces of law should be fully implemented first, and an evaluation of their effect should be conducted before any further actions are discussed. 


In the area of payments, just recently new rules have been adopted to ensure transparency and comparability of services (PSD II, Interchange Fee Regulation (IFR).  ESBG thinks that the Commission's focus in this regard should rather be on the harmonised transposition and the proper enforcement of these rules. Before any new measures should be considered the (legally required) evaluations and market assessments should take place. An issue that ESBG sees, however, is that laws already in place might need to be adapted to encompass emerging new digital technologies, whilst of course remaining technology-neutral.


Another important point are pre-contractual information duties. European laws contain a confusing and more and more complex spider web of consumer-related information obligations (for instance: Consumer Credit Directive, Directives on Distance Selling and Doorstep Selling, E-Commerce Directive, Unfair Commercial Practices Directive, Mortgage Credit Directive, Payments Accounts Package, Payment Services Directive, Markets in Financial Instruments Directive, KIDs requirements/PRIIPS; not forgetting the related level-2 measures).Consumers can only make reasonable buying decisions if they do not only receive easily understandable information, but also read through  it. Meaning 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 not so true anymore. The European Commission itself states in its Staff Working Document on Knowledge-Enhancing Aspects of Consumer Empowerment (SWD(2012) 235) that there is a limit to how much information a consumer can or wants to absorb at the various steps of the purchasing process. More information is not always better for consumers. As the Commission points out on page 11 of the current 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 decision. 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.




18. Should any measures be taken to increase consumer awareness of FIN-NET* and its effectiveness in the context of the Alternative Dispute Resolution Directive's implementation?

* FIN-NET is a financial dispute resolution network of national out-of-court complaint schemes in the European Economic Area countries that handle disputes between consumers and financial services providers


​​Yes
​XNo
Don't know / no opinion / not relevant


Please explain your answer to question 18:

Regarding any further measures, ESBG thinks that the Commission should await the implementation of the Directive on Consumer Alternative Dispute Resolution (ADR) and the Regulation on Consumer Online Dispute Resolution (ODR). If the Commission, after the implementation of these new rules, still sees the need to get active in this regard, ESBG would support the following measures:

- Better informing consumers about the availability of out-of-court settlement schemes for cross-border disputes;

- Providing out-of-court settlement schemes with effective means to solve consumers' cross-border problems:

- Ensuring that out-of-court settlement schemes operate according to the same rules and offer equally effective means to help consumers across the EU;

- Fostering cross-border mediation (in line with the new ADR/ODR rules).

- Finally, ESBG suggests that the Commission offers their information on the FIN-NET homepage not only in three languages as this might limit the accessibility to this tool for a considerable amount of EU citizens (http://ec.europa.eu/finance/fin-net/index_de.htm).

 



19. Do consumers have adequate access to financial compensation in the case of mis-selling of retail financial products and insurance?


​X​Yes
No
Don't know / no opinion / not relevant

Please explain your answer to question 19:


Various existing bodies ensure that consumers have adequate access to financial compensation in case of miss-selling: Ombudsman institutions, the financial market authorities, national consumer rights associations, other national arbitration boards and, of course, judicial procedures.




21. What further measures could be taken to enhance transparency about ancillary insurance products and to ensure that consumers can make well-informed decisions to purchase these products?


ESBG asks the Commission to first await the implementation and impact of rather new legislation in this area. The MCD, IDD and MiFID II contain information and transparency duties which shall help consumers to better understand a certain product and enable them to do a comparison of products to choose from.

 



21.1 With respect to the car rental sector, are specific measures needed with regard to add-on products?


​XYes
No
Don't know / no opinion / not relevant

 



​​21.2 If specific measures are needed with regard to add-on products, what of the following could be done?


Please tick all relevant boxes

​​XAll the car rental costs, including insurance, should be presented in a clear and simple way in advance of the purchase / on-line order
All add-ons and optional services should be singled out and consumers should be able to accept or refuse them
Other
Don't know / no opinion / not relevant

 



22. What can be done at the EU level to support firms in creating and providing innovative financial digital services across Europe, with appropriate levels of security and consumer protection?


ESBG thinks that regulation is needed in particular in two scenarios:

(1) If loosely controlled businesses bear considerable risks for consumers, clear rules are necessary to ensure a common level of consumer protection. In these cases, the same rules need to apply to the same business with the same risks.

(2) In addition, rules are necessary when innovation is thwarted because a certain sector lacks sufficient legal certainty. Compared to new emerging businesses, traditional players suffer more from legal uncertainty. They have to comply with much stricter rules and are, due to their long-standing consumer relationships based on trust and on a certain business model, more risk-averse. A clear legal framework can boost competition and innovation in such cases.

In particular ESBG would welcome the following initiatives:

- Cross-border sales of retail financial services could be boosted by harmonised tools for remote client identification (KYC-proceedings etc). By doing so, the conclusion of contracts would get less tied to provider and buyer being in a same location at the same time and be much more flexible throughout Europe.

- New emerging players may nevertheless negatively impact the integrity and safety of online markets. Any activity that aims at improving data security will have to include so called fintechs. As banks and so called fintechs get more and more intertwined, this is essential to secure data security. Due to their relative newness to the market, fintechs are usually less used to dealing with cyber-attacks. This makes it likely that they are the weakest link in any data transfer that might include data from banks. The European savings and retail banks consider it important to tackle this issue, for instance by working together across industries and with governmental authorities to more effectively fight cybercrime.




23. Is further action needed to improve the application of European Anti-Money Laundering legislation, particularly to ensure that service providers can identify customers at a distance, whilst maintaining the standards of the current framework?


​XYes
No
Don't know / no opinion / not relevant

If further action is needed to improve the application of European Anti-Money Laundering legislation, particularly to ensure that service providers can identify customers at a distance, whilst maintaining the standards of the current framework, please state additional comments on possible actions (e.g. guidelines at EU level, etc.):


- Facilitating the remote customer identification would foster the development and use of digital channels;

- National regulations that (still) require the customer's original signature should be changed by the respective national legislators - with respect to security standards – in order to facilitate the conclusion of contracts via digital channels;

- The conclusion of contracts via digital channels would be much easier when both electronic identification and electronic signature could be used.




24. Is further action necessary to promote the uptake and use of e-ID and e-signatures in retail financial services, including as regards security standards?


​XYes
No
Don't know / no opinion / not relevant
  


If further action is necessary to promote the uptake and use of e-ID and e-signatures in retail financial services, including as regards security standards, please state additional comments on possible actions:


The regulation on electronic identification and trust services (eIDAS) came into force on 17 September 2014. From 1 July 2016 onwards eIDAS will apply and the existing e-signature directive will be repealed. The eiDAS Regulation invites Member States to cooperate in facilitating the technical interoperability of the notified electronic identification schemes. Differences in technical requirements due to specifications of national electronic identification schemes are unavoidable. ESBG recommends that the Commission focus its attention on achieving genuine interoperability between notified national schemes issuing and managing electronic identities. From ESBG's point of view, interoperability is one of the key elements to foster cross-border financial business. Both public and private electronic identification and interoperability schemes should provide access through digital channels to public and other services (including financial services), both in the country of issuance of an electronic identity, and across the EU.

ESBG would like to rest assured that the Commission will encourage the development of also private electronic identification solutions that will work both within a Member State and also cross border.




25. In your opinion, what kind of data is necessary for credit-worthiness assessments?


First of all, ESBG would like to underline that credit-worthiness assessments must be based on an analysis of the customer's income and expenses and not upon the value of its property, as the housing bubble of 2008 has shown. In addition, ESBG thinks that ratios and scores are important tools, however, the individual circumstances of a customer applying for a credit should also be part of the picture.

Above that, ESBG would like to bring attention to the fact that, hardly surprising, a creditworthiness-assessment is more precise the more data is available. Of course, data privacy needs to be properly balanced while taking into account the advantages that a more extensive use of data offers. For the consumer, a good creditworthiness-assessment is the most effective tool to prevent future over-indebtedness because it helps to offer a credit which is aligned with the consumer's repayment capacities. For financial institutions, a better creditworthiness-assessment means a better business by avoiding insolvencies and write-offs. Better data also helps financial institutions to react at a very early stage in case of arrears and payment difficulties. Early warning systems can help to avoid worst-case scenarios for the consumer as well as for the financial institution. In the end, the right balance between the needs of the business, the consumer and data privacy is key. Above that, and in view of fostering the cross border business, ESBG considers it useful to provide banks with access to existing national registers of the Member States (e.g. credit registers; any registers which help to verify the accuracy of the tax notice; any real estate value registers…).

Last but not least, please see below a non-exhaustive list of criteria which are regularly used in credit-worthiness-assessments:

- General personal data of the borrower (identification, date of birth, place of birth, address);

- Data related to the borrower profile (age, type of residence and length of time in that location, family status, marriage license type, number of children, profession, job seniority, mobile telephone number, fixed-line telephone number, business telephone number);

- Income details (regular net income, variable income, any other job-related benefits, any further regular income, etc.);

- Details on the bank account where the income is paid to (bank name, opening date of account, monthly balances for 3 months, overdraft charge details);

- Details on spending (identification of regular spending: rent, loan and type of loan (mortgage, consumer, including revolving), loan maturity dates, start/end dates, remaining principal, maintenance allowance paid, insurances etc.).

- Information on future pension rights and retirement age;

- Details on borrowers' movable and real assets;

- Characteristics of the mortgage plan (purpose of the loan (primary residence, secondary, rental), characteristics of the property (house, flat, plot, etc.), condition of the property (new/old), living area, address of the property, purchase cost of the property, cost of works);

- Details on the financial package (loan details – amount, rate type (fixed/variable), rate, term, repayment frequency, amount payable at maturity, payment amount, existence of a bridge loan, etc.);

- Borrower insurance details (name of the insurer, percentage of credit covered, term).

Of course, creditworthiness assessments also need to be compliant with national laws and European rules, such as the EBA guidelines on creditworthiness assessment (1 June 2015).

Regarding cross-border business, ESBG considers it useful that banks can access existing national registers in the Member States such as:

- Existing credit registers in the loan applicant's country of residence;

- A website if there is one or existing registers that can help to verify the accuracy of the tax notice given out by a certain Member State to the loan applicant;

- Any real estate value register, if existing, in the country where the loan applicant's residence(s) are located.




26. Does the increased use of personal financial and non-financial data by firms (including traditionally non-financial firms) require further action to facilitate provision of services or ensure consumer protection?


Yes, at Member State level
​XYes, at EU level
No
Don't know / no opinion / not relevant

In the banking business consumers call more and more for tailor-made products and individualised services. Banks have to comply with these expectations to stay competitive. Regarding the use and flow of data, ESBG is of the opinion that it is essential to get the balance right. Companies should have sufficient and fair access to data. In particular, a free flow of data within the same company (parent company and subsidiaries) needs to be ensured. Fair access meaning that client data which has been collected by a company needs to stay within this company.

It is important to ensure that consumers have an adequate level of protection where their personal data is concerned. For instance, they should be able to access their personal data and decide which third parties they allow (or not) to have access to their personal data.

Another important point is the storage of data, in particular the location of personal data. For reasons of data protection, personal data should be stored in the EU. This also makes sense from a public security point of view. Furthermore, a clear legal framework regarding the location of data can help to protect business confidence and boost consumer trust.




27. Should requirements about the form, content or accessibility of insurance claims histories be strengthened (for instance in relation to period covered or content) to ensure that firms are able to provide services cross-border?


​XYes
No
Don't know / no opinion / not relevant


If requirements about the form, content or accessibility of insurance claims histories should be strengthened to ensure that firms are able to provide services cross-border, please state additional comments on possible actions:


The response is based on the assumption that claims are handled in the same way throughout the Member States.




28. Is further action necessary to support firms in providing post-contractual services in another Member State without a subsidiary or branch office?


Yes, at Member State level
Yes, at EU level
​XNo
Don't know / no opinion / not relevant

Please explain your answer to question 28:

As described under question 2A a subsidiary or branch office is currently still common practice when banks want to get active in other Member States.

 



29. Is further action necessary to encourage lenders to provide mortgage or loans cross-border?


Yes
​XNo
Don't know / no opinion / not relevant


Please explain your answer to question 29:


As a general remark, ESBG is not in favour of any harmonisation of private insolvency proceedings (including debt collection). Such proceedings differ considerably throughout the Member States and are closely linked to the economic and social situation within a country. However, improving lenders' access to valuable information on these proceedings in other Member States would help banks to make good decisions upon the provision of a loan cross-border.

If anything, ESBG thinks that the following measures could further encourage lenders to provide loans or mortgages cross-border:

- Promoting a property loan guarantee system by surety companies throughout Europe. This system works successfully in France. In France property loans are primarily guaranteed by surety companies (53% of outstanding loans as of the end of 2014 - source: ACPR - 2014 Housing Loans). The security that the bank receives is a direct, first-request guarantee that covers 100% of the loan. A surety system where the borrowers' reimbursement capacity is the main condition for granting a credit is very secure compared to a system where this is not the case. Guaranteed loans have the following specifics: (1) a second independent risk analysis performed by surety companies; (2) The quality of the guarantee at the first request which is based on the risk premiums perceived. (3) The surety company's first right to both the underlying property and the totality of the borrower's assets in case of a default. (4) If needed, the absorption of losses by surety companies' own funds.

- Facilitating recovery claims by mortgage or unsecured lenders within the EU.



30. Is action necessary at the EU level to make practical assistance available from Member State governments or national competent authorities (e.g. through 'one-stop-shops') in order to facilitate cross-border sales of financial services, particularly for innovative firms or products?


​XYes
No
Don't know / no opinion / not relevant

 

If action is necessary at the EU level to make practical assistance available from Member State governments or national competent authorities in order to facilitate cross-border sales of financial services, particularly for innovative firms or products, please state additional comments on possible actions:


An idea might be the creation of a joint European point of contact that provides information to consumers and professionals.

Furthermore, ESBG would like to put a spotlight on the fact that often barriers to the European single market do result from differences in tax laws. Such differences can have a big impact and can suffocate projects on cross border sales. For example, in Croatia national laws require that a customer's tax-number (which is needed for the purchase of a deposit product) has to be picked up in person at a local tax authority office. Such requirements hinder cross-border business of retail financial services considerably and are counterproductive to a functioning digital single market.



31. What steps would be most helpful to make it easy for businesses to take advantage of the freedom of establishment or the freedom of provision of services for innovative products (such as streamlined cooperation between home and host supervisors)?


ESBG considers that the issuing of a European passport can help to ease cross-border business activities.

In view of fighting cyber-attacks, ESBG suggests establishing a network of national information security authorities to exchange information on potential threats, attacks and recommended countermeasures.

 


32. For which retail financial services products might standardisation or opt-in regimes be most effective in overcoming differences in the legislation of Member States?

Please tick all relevant boxes


Life insurance (This work would build on existing EIOPA research on the Pan-European Personal Pension product)
Mortgage
Other
​XNone
Don't know / no opinion / not relevant

>> See the .pdf version of the ESBG response 


Retail payments; Proportionality; Digitalisation