Brussels, 9 September 2024 – The European Banking Federation and its members are fully engaged in supporting the completion of a European Savings and Investments Union as called by Enrico Letta in his report published in April 2024. Developing EU capital markets will contribute not only to ensuring that the digital transformation and green transition of our economies are properly funded, but will secure the bedrock upon which EU competitiveness can be relaunched.
Currently, EU capital markets are losing competitiveness, as recently highlighted, among others, by the President of the Eurogroup, Pascal Donohoe and President of the European Commission, Ursula von der Leyen, who recalls in the EC Strategic Agenda 2024-2029 that the fragmentation of our financial markets sees ‘’EUR 300 billion of European families’ savings transferred to foreign markets every year”. Game-changing and ambitious reforms are therefore key. In this context, we fully support the aim of the European Commission to improve retail investors’ access and participation to capital markets through the Retail Investment Strategy (RIS) to ensure that more households benefit from the prosperity generated by EU companies and SMEs.
President von der Leyen also highlighted in the new EC Agenda the need to reduce red tape and administrative burden in order to improve EU competitiveness: “Each Commissioner will be tasked with focusing on reducing administrative burdens and simplifying implementation: less red tape and reporting, more trust, better enforcement, faster permitting.”
Against this background, we are concerned that the RIS, as proposed and currently negotiated, is bound to stay the opposite course, significantly increasing complexity, costs and administrative burden not just for firms, but -most importantly- for their clients, whose customer journey is heavily complexified.
The multiplication of checks, tests, overload of information and warnings ( i.e., proposals regarding the new inducement test, new best interest test and related clauses on the “unnecessary additional features”, as well as additional disclosure of costs and charges) will disincentivize savers from investing in financial markets and will lead them to prefer easily accessible unregulated products, such as crypto assets, a trend already seen occurring with new investors.
We believe that an effective investor protection should not lead to the superimposition of excessive requirements, but rather strike the right balance between clarity, flexibility, effectiveness, variety and freedom of choice. A key element of this is, in our opinion, the reinforcement of product governance via an adequate, workable Value For Money (“VFM”) framework. Provided that the rules are drafted in a calibrated way that allows for flexibility for investment firms, VFM could be an effective tool for managing potential conflicts and ensuring product-specific scrutiny of delivered value against the considerations of a full range of qualitative and quantitative features, costs and investment targets. Among the 3 proposals, the text proposed by the European Parliament seems to be the less prejudicial basis for this approach. However, some improvements still need to be made in upcoming interinstitutional dialogue, as the proposal in many ways remains unclear, is too complex, and risks leading to price regulation and impaired competitiveness.
This text is an opportunity to demonstrate the EU can rise to the challenge of competitiveness, reducing the number and superimposition of over-protection and anti-competitive rules, and at the same time reinforce a few well-targeted measures to strengthen and develop a domestic market of European players and investors, who are the key for financing the digital and green transitions.
The EBF continues to work in this direction with its members, drawing on their experience to identify and client-oriented solutions that may foster safe and informed access to capital markets.
For more information:
Jacopo Borgognone, Senior Policy Adviser – Financing Growth, j.borgognone@ebf.eu
Gabriel Daia, Head of Communications & Public Affairs, g.daia@ebf.eu
About the European Banking Federation:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.x
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
Banking sector integral to EU’s competitiveness plan