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European bankers and insurers advocate that financial services products should be better comparable across Europe

The 20 Members of the European Financial Services Round Table (EFR), Chairmen or Chief Executives of leading European banks and insurers, stress that differing consumer protection rules for retail financial services products are real barriers for consumers to choose the right products corresponding to their needs, and for providers to efficiently organise their operations and distribution activities.

In its second report on consumer protection issues which was launched today, the EFR describes in more detail how consumer protection rules in retail financial services could be converged if not harmonised across the EU.

Michel Pébereau, who sponsored the new report, gave a press briefing in Paris today and commented: “In Europe we have a patchwork of different consumer protection regimes. Consumers experience practical obstacles - like e.g. different terminologies, different calculation methods, different information for similar products, uncertainty regarding the relevant legal regime - when comparing financial services products and shopping around Europe. Lawmakers have to find more efficient ways to create a robust consumer protection regime, which functions all over Europe and has the confidence of EU consumers. If you look at the ongoing debate concerning the current proposal on a consumer credit directive it becomes apparent that integration of retail financial services is not an easy job. We believe that some essential issues have to be fully harmonised. The other existing rules can remain national but have to be mutually accepted by other Member States. ”

Retail financial services markets are still fragmented and need to be more integrated to drive down prices and to increase European-wide choice for consumers. A first important step would be the introduction of a mandatory Pan-European Info Box (PEIB). Consumers would then be enabled to compare products at a pre-contractual stage by the standardised provision of relevant product information.

Starting from its February 2004 report, the EFR refined its methodological approach and tested it on a concrete example – an unsecured personal loan. Members of the EFR are convinced that such a multi-track approach could prove helpful for further integration and makes, inter alia, following proposals:

  • determination of principles for a distinction between key and non-key requirements and definition of key requirements for each product type;

  • targeted full harmonisation of key requirements by means of EU-legislation;

  • mutual recognition of existing national rules regarding non-key requirements.

The EFR believes that it has to be carefully evaluated for which types of financial services the flexible approach - full harmonisation of certain key requirements in combination with mutual recognition - is workable. A thorough case-by-case analysis should be done in order to identify those financial services product types which are eligible for further integration in the short and medium term.

A high-level expert group formed by representatives of the various stakeholder groups should 1) determine the principles, 2) on their ground, identify key and non-key requirements, 3) differences of national laws regarding the non-key requirements should be identified. A detailed synopsis could prove instrumental to achieve mutual recognition of those differing rules at Member States' level.

“The approach the EFR proposes is applicable to a range of products for which harmonised rules should be established - for the sake of both consumers and providers. This is not only true for consumer loans or possibly housing loans but also for other products. If Europe wants to become more competitive in the global arena there is no way other than to develop a consistent methodology and strategy – particularly in retail financial services”, said Mr Pébereau who is also Président du Conseil d'Administration of BNP Paribas.

The EFR currently has 20 Members, Chairmen or Chief Executives of leading European banks and insurance companies and was formed in 2001. The purpose of EFR is to provide a strong industry voice on European policy issues relating to financial services. The objective is to support the completion of the single market in financial services. Chairman of the EFR is Pehr G Gyllenhammar.