30 October 2012

Ian Williams: The EBA, consumer protection and the "retailisation" of complex products

Despite inheriting the same basic blueprint common to all European Supervisory Authorities (ESAs) – which explicitly factors consumer protection into the fabric of the new authorities – there remains a question as to whether the EBA has the cultural agility and resources to take on and inculcate a greater consumer protection perspective. There is no talk of paradigm shifts in this part of the evolving regulatory umbrella.

Recent public statements from the EBA have raised consumer protection up the agenda, as fallout from the Libor scandal has impacted into the retail space. EBA Chairman Andrea Enria told the European Parliament's economic affairs committee: "new rules were urgently needed for home loans and other products given mis-selling scandals, poor compliance with anti-money laundering rules, and the manipulation by Barclays of the Libor used to help price some consumer loans… We are now working at a much higher speed in these areas and envisage issuing important guidelines in the area of mortgage lending - on responsible lending and on arrears management" (19 September 2012).

EBA Consumer Day 25 October London

The day covered three main subjects:

• Panel 1: Consumer Indebtedness
• Panel 2: Retailisation of Complex Financial Products
• Panel 3: Consumer Trends in the EU Retail Banking.

The panels consisted of representatives of banks and regulators, together with a few academics and consumer input from EuroFinuse (Guillaume Prache) and Financial Services Users Group (FSUG Mick McAteer) in panel 2.

Overall, EBA didn’t seem to need any significant intervention powers (Article 9), it had not used them so far and seemed uncertain as to how to go about its consumer protection responsibilities, with fairly basic questions still being asked about the nature of retailisation, financial innovation, indebtedness and financial literacy.

It is suggested here that the EBA will seek to act as a cooperation and information regime in the area of consumer protection, leaving the more intensive scrutiny of upstream regulations and products to the other ESAs.

Please click on the link below for the full article.

© Ian Williams