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29.11.2018 10:28 Age: 16 days
Category: Blog entry

EU Financial Policy 2019-2024: A New Deal for Investors and Users of Financial Services


It seems like yesterday that the newly elected European Parliament (EP) and the Juncker Commission announced important reforms to address the ongoing fallout from the 2008 financial crisis. In the 10 years since the financial crisis, decision makers in Brussels have introduced sweeping new financial rules and regulations, and under Juncker the crucial and ambitious initiative of a “Capital Markets Union” (CMU) was launched. Yet, EU citizens as savers and investors are left with a bitter aftertaste. 

Whether as individual investors, shareholders, savers, life insurance policy holders, pension fund participants or borrowers, European citizens are all in one way or another, users of financial products and services. The financial crisis has affected every single household in the European Union. Yet, despite highlighting that households are the main source of funding for long-term investment in the European economy, policy makers, continue to sacrifice the wellbeing of European citizens in their quest for “financial stability”.

For too long now individual investors and savers have been gradually crowded out of equity markets and pushed into frequently under-performing packaged products. To ensure long-term growth it will be crucial to rehabilitate equity investment across the board and ensure a level playing field for all market participants. If the CMU can help reconnect those companies and projects that need capital with those who have it, then it may well succeed in what it set out to accomplish in the first place.

But even the Commission’s CMU flagship seems to be at risk of having the wind taken out of its sails by the latest tendency to put “Sustainable” Finance initiatives first. Whereas BETTER FINANCE firmly believes that it is essential to promote a cleaner and fairer economy, this should never happen at the expense of long-term and pension savers. The concept of sustainable finance should translate into products that are exemplary in complying with EU investor protection rules, especially in terms of fair, transparent, clear and non-misleading investor information.

With the current European Commission (EC) and European Parliament (EP) already wrapping up, BETTER FINANCE is looking ahead at the priorities in matters of finance for the next five years (2019-2024). For EU Citizens as Savers and Investors a real renaissance of the CMU Project - a CMU 3.0 as it were - will be key, even more so in light of a looming Brexit. 

Increasing the attractiveness of EU Capital Markets for all market participants remains a challenge, but many things can still be done to regain the trust of EU Citizens. For a start, more should be done to tackle mis-selling. As shown by several studies by the EP and BETTER FINANCE, rules pertaining to the protection of financial services users are not being adequately and consistently enforced. The European Supervisory Authorities (ESAs) must make it a priority to use their new product intervention powers. 

In the same vein, it is essential that EU citizens that are investing in capital markets enjoy robust protection. To this end a CMU should go hand-in-hand with fair and equal access to collective redress for individual investors. 

The development of a Capital Markets Union is also the opportunity to forge a more direct and stronger link between the savings of European citizens and the real assets they are invested in. For the Capital Markets Union to succeed, European citizens, as individual investors and savers, should really be at the core of the project and benefit from a direct and easy access to simple and transparent investment products (such as equities, bonds, index ETFs and UCITS funds), instead of alienating them further and pushing them into more packaged, complex, opaque and fee-laden products. 

It is important to remember that being an individual investor is not, and should not be, a full-time job. Providing simpler products is a first step towards investor empowerment but much more should still be done to provide individual investors with the necessary information and tools to make informed choices. Improving transparency on performance and fees of all investment products would go a long way towards achieving this. Comparable and simple information is also a prerequisite for reliable, independent and EU-wide web comparison tools for financial products. 

Many other points (too many to list here), related and unrelated to the CMU initiative, feature on BETTER FINANCE’s priority list for the next 5 years, such as free cross-border voting for shareholders inside the EU, ensuring the consistency of investor protection rules at EU level, minimising conflicts of interest in the distribution of financial products and improving long-term and sustainable value creation based on a clear “taxonomy” clearly identifying the activities that are “sustainable” for the Planet and for Humanity. 

To ensure a coherent and consumer-friendly approach to financial policy at EU level, it is imperative that the EU continue to improve its engagement with investors and other users of financial services in the EU financial policy making process. After all, “EU households are the main source of long-term financing for the real economy”.

 

By Arnaud Houdmont, Chief Communications Officer, BETTER FINANCE


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