Hearing on Retail Financial Services, 19 September 2007 by EuropeanUnion


									                         EUROPEAN COMMISSION
                         Internal Market and Services DG


                                                                   Brussels, 19 September 2007

  Jörgen Holmquist, Director General, DG Internal Market & Services

   Opening Address in the Public Hearing on Retail Financial Services
              Brussels, Wednesday, 19 September 2007

Good morning ladies and gentlemen. I am very pleased to welcome you to this public
hearing on retail financial services. I think the large number of people attending today is
a sign of the importance we are all giving to the future development of retail financial
services. And also to finding ways to make the market work better for everyone.

We have a busy agenda today, so I would like to get started straight away. Firstly, let me
remind you of the format of the day.

After I finish, we are pleased to welcome Ieke van den Burg from the European
Parliament, who will give us an insight into the views of the European Parliament's
ECON committee on retail financial services.

We will then start on the first of the day's three panel debates. The themes of the three
panels are largely the themes that formed the core of the Green Paper on Retail Financial
Services, namely

• empowering Europe's consumers,

• enhancing consumer confidence, (and)

• improving price, quality and choice.

I am sure we will hear some very interesting insights on all of these issues from today's

These panel debates are designed to be as interactive as possible. The panel members
will be asked to answer a series of questions on specific aspects of how to develop the
single market in retail financial services.

We would like to encourage a vigorous debate not only between the panellists but also
including input from you, the participants in this hearing. Interpretation is available to
and from English, French, German, Spanish and Italian.

Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.

Consultation on Green Paper

Turning now to the core of today's hearing, I would like to say a few words on the
consultation we conducted on the Green Paper on Retail Financial Services.

We produced this Green Paper for a variety of reasons.

• We were following up on our general financial services policy which we had set out in

   In it we committed to devoting greater attention to the retail market.

• We were also responding to some of the findings in the DG Competition reports on
  retail banking.

• Furthermore we wanted to draw together all of the many policy strands that come
  under the umbrella of "retail financial services",

• And finally, we wanted to ask you, the stakeholders, to let us know of the
  opportunities and obstacles that you see in today's market for retail financial services.

Your response has been overwhelming. We have received almost 190 answers to the
consultation, giving us some very detailed input to our policy making.

We have learned a lot from reading the submissions, and I would like to take this
opportunity to thank all of the respondents for contributing with such energy. We have
been particularly pleased with the response to the consultation from consumers and users
of financial services. These have represented some 18% of the submissions, which is far
in excess of the usual. This is an indication of just how important retail financial services
are in citizens' lives, and reminds us of how vital it is that we get our policies right for

Overall reaction

In general, the responses to the consultation have agreed with the main objectives and
priorities set out in the Green Paper. There appears to be a general consensus that retail
financial markets will remain predominantly local for the foreseeable future, driven
primarily by issues of language, culture and familiarity with local providers. The
Commission acknowledges that this is the case, but would like to make life easier for
those consumers who are interested in using offers that originate elsewhere. Also for
providers who want to explore new commercial opportunities.

Obstacles to integration

As regards the main obstacles to further integration of retail financial services markets in
Europe, most industry representatives have identified domestic taxation policies and
consumer protection rules as the key impediments to increased cross- border activity. In
particular, there was an almost unanimous view among industry contributors that
consumer protection rules should be harmonised across all Member States.

Unsurprisingly, the submissions made by Member State authorities are not generally
supportive of these claims, and consumer groups strongly oppose maximum
harmonisation. Consumers' first priority appears to be addressing problems of poor
quality information and poor quality advice which do not facilitate customers making
comparisons between products. They also highlighted tying and bundling as practices
that inhibit consumer mobility.

So, all in all, priorities differ depending on the stakeholders involved. It will be the
Commission's job to do what it can to address some of the many concerns.

Alternative Dispute Resolution

I'd just like to highlight some of the reactions that we received on the questions posed in
the Green Paper. Some of these concerned consumer confidence.

One of the main reasons suggested for consumers' lack of willingness to act on a cross-
border basis is that they wouldn't know who to turn to should things go wrong. FIN-NET
is a network of the many alternative dispute resolution systems operating in the Member
States. This helps consumers in dealing with cross-border complaints. The consultation
revealed widespread support for FIN-NET. However, most believe that consumers are
not aware of its existence. They think that further publicity and an awareness campaign
should be undertaken to promote its activities and encourage more use of the system.

As regards whether Alternative Dispute Resolutions schemes should be harmonised
across Europe, there was a mixed response. Some feel that harmonisation could interfere
with efficient local schemes. So this is obviously an area where much remains to be

Long-term savings, 28th regime

Another subject that prompted many reactions was that of long-term savings.

Most respondents across all categories felt that the Commission does have a role here.
They stated that with the rising age profile of European citizens and its impact on
pension provision, it is important that the Commission take steps to ensure that
consumers can access third pillar pensions where required. There were differing views as
to the exact nature of the solution.

On the question of a 28th regime, there were mixed opinions of its suitability. Some felt
that it would simplify matters and allow producers to develop a suitable product.
Consumer groups felt that it may increase confusion by requiring comparisons to be
made between a 28th regime product and existing domestic alternatives.

Fragmentation of retail insurance market

There were many reactions to the questions on the retail insurance market.

Representatives from the insurance intermediary sector suggested that they can have
a critical role to play in reducing fragmentation where it exists in the insurance market.
Insurance providers, on the other hand, did not accept the view that the insurance sector
is particularly fragmented. They pointed to the large number of European insurers who
have established a presence in another Member State.

The main factor they see mitigating against the sale of life insurance on a cross border
basis, is the availability of tax incentives in certain Member States.

In relation to non-life insurances, such as motor insurance, other factors come into play,
including the condition of the road network, claims levels, local laws and consumer
protection rules. Policies tend not to be homogenous for these reasons and are more
difficult to compare.

Consumer representatives, for their part, were not convinced that there is a significant
appetite among consumers for cross border shopping for insurance services.

Financial Education

There was a unanimous view that consumer education and financial literacy programmes
are critical to empowering consumers.

This is best achieved through the school curriculum. The consumer groups did warn that
financial literacy programmes are not a substitute for consumer protection rules. And
also that as a school programmes would be a long term initiative, the issues of educating
existing consumers need to be considered.

While education is a matter for Member States, most respondents still felt that the
Commission had a critical role to play in this area.

The starting point should be that the Commission gather information on existing
programmes in each Member State. And then sets out best practice in this area, to enable
other Member States to develop suitable programmes. These issues will be addressed in
a Communication on Financial Education that we plan to bring out in November.

These are just some of the many issues that you and the other contributors commented on
in your submissions. I am sure that they, and many other equally vital subjects, will be
debated on here today. Again, I encourage you to take part fully in today's discussions
and I wish you an interesting and a productive day.


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