The current piecemeal approach to conduct regulation could be about to change as global and regional regulators try to find new ways to strengthen consumer protection and create a greater degree of convergence across national regulators.
Earlier this month, the head of the joint G20/OECD task force on financial-consumer protection, Theodor Kockelkoren, made it clear that more thought needs to be given to building the counterbalance system to the prudential system now being built around the Single Supervisory Mechanism.
Furthermore, in its response to the European Court of Auditors findings that consumer protection was not given a high enough priority within the EBA the European Commission acknowledged that more use could be made of the Joint Committee of the ESAs in the field of consumer protection (note: during 2011 there was no discussion on consumer protection on the EBA Board of Supervisors and as at the end of February 2013 the EBA’s Consumer Protection Unit consisted of only two staff members).
This issue has been addressed by the joint ESA committee over the past couple of years, but it may take some more time to harmonise the approaches of ESMA, EIOPA and the EBA. The common investor protection framework in MiFID 2/MiFIR may at least provide a helpful starting point, and provides a basis for moving to the wider range of retail financial services products across the whole financial services sector.
Gabriel Bernardino, Chairman of EIOPA, has said that more detailed rules are to be expected, following the high level principles on product oversight and governance published last year. The challenges consumers face in understanding investments and savings and other complex products is also not being underestimated by the ESAs. EIOPA and the other ESAs are working together to prepare for detailed practical work on implementing measures to help address this challenge.
However, Directives, Regulations and even harmonised regulatory guidance will not be enough in themselves. The boards of banks, insurers and asset managers must all continue to play their part in establishing, embedding and maintaining corporate cultures that create the right client outcome. We are seeing a variable picture on this across Europe – but expect convergence to emerge as the new legislation beds in.