Some countries reject more centralised supervision; Rules designed to improve investor confidence; State/EU friction could weaken impact
European Union plans to increase protections for consumers of financial services are reigniting a long-simmering power battle between national and EU regulators that could hamper how the tougher safeguards will be enforced.
The European Commission, the EU's executive body, on Wednesday proposed stricter rules on selling financial products, such as mutual funds and insurance, to increase consumer trust in investing, and deepen the bloc's capital market as it faces competition from Britain since Brexit.
Retail financial services are typically regulated by national rather than EU watchdogs and some market participants are predicting clashes, particularly on the transfer of greater supervisory powers to the securities and insurance watchdogs, ESMA and EIOPA.
The plans, known as the retail investment package, propose an EU layer of "value for money" safeguards for products and tougher EU rules for financial advisors.
Firms would also have to report to the watchdogs on their cross-border services to "identify areas where supervision should focus on and where stronger cooperation may be needed", the plans say.
"The question for me is does the retail investment strategy get bogged down into an institutional power sharing question before you even start to talk about the substance?" said Victor van Hoorn, head of the Brussels office at the Investment Company Institute, a global funds industry body.
ESMA and EIOPA would devise cost and performance benchmarks that about 30,000 mutual funds and other products would have to comply with, or be withdrawn.
ESMA, which would need an extra 11 staff to exercise its new powers, has also proposed fining asset managers who charge "undue" costs to customers.
The division of power between state and EU-level financial regulators has long been politically fraught, with countries rejecting the notion of a centralised counterpart to the powerful U.S. Securities and Exchange Commission....
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