On Monday 27 November, the European Consumers Organisation, Better Finance, Finance Watch, AGE Platform Europe, EFIN and COFACE Families Europe, disappointed by the European Commission's proposal to revise the three European financial supervisory authorities (ESAs): ESMA, the EBA and EIOPA, which supervise the financial markets and the banking and insurance sectors respectively (see EUROPE 11864), announced their own planned reform, which suggests the creation of a European Financial Consumer Protection agency.
“The Commission missed a historic opportunity to propose an ambitious reform of the ESAs to deliver the protection EU financial consumers need”, they write in an open letter to the Presidents of the Commission and the European Parliament, the committee on economic and monetary affairs and the committee on the internal market and consumer protections of the European Parliament as well as to the Estonian finance minister, whose country currently holds the Presidency of the Council of the EU, and also to the Bulgarian finance minister ahead of the next Presidency.
The six organisations argue that the current sectorial supervisory architecture with three separate European authorities ignores the reality of the retail financial markets in Europe, where borders are increasingly fluid. Today, the same distributor can offer securities, funds, life assurance products, banking or pension products for sale that are based on insurance in some cases, they explain, stressing that the so-called 'Twin Peaks' supervisory approach, by merging the EBA and EIOPA, would be most appropriate.
Another weakness in the proposal, in their view, is the lack of clear distinction between the prudential supervisory mandate and the business conduct supervisory mandate conferred upon the ESAs. The organisations take the view that these mandates pursue different objectives and often conflict with each other: the stability of a financial system on the one hand, and the fair treatment of consumers on the other.
A European Financial Consumer Protection Agency
In order to plug these two gaps, the organisations propose a two-stage reform of the architecture. They suggest that initially, in the short term, a 'consumer protection' division be set up within each ESA in order to clearly separate prudential supervision from business conduct supervision activities. In the longer term and in a second stage, they would like a 'Twin Peaks' supervisory model to be set up, which would go hand in hand with the creation of the European Financial Consumer Protection Agency.
These new divisions - and, later, the new agency - would also be tasked with drafting binding standards for the supervision of the conduct of activities for the competent national authorities and with coordinating the application of these standards. The organisations consider that they should be given direct powers of supervision and of intervention, particularly when it comes to risky products or practices, which are widespread in several member states.
To carry out these missions, they should have a separate governance structure, supervisory boards made up exclusively of national consumer financial protection authorities and with a separate and independent budget.
“Such a reform would accelerate the creation of a common supervisory culture across Europe to the benefit of consumers and EU market integration alike”, they argue.
The letter is available at the following address: http://bit.ly/2AaKNq3. (Original version in French by Marion Fontana)