Thank you very much for the kind invitation from QED to put forward the users’ views.
My intervention will be short and not exhaustive; I will focus on those points of higher relevance for financial services users.
First of all, I would like to refer some brief words to BETTER FINANCE:
- European Federation of Financial Services Users
- Through its 50 member associations, directly representing around 4 million financial services users e.g individual shareholders, retail investors and others (mortgage holders, credit card users).
Besides financial stability, there are two main reasons why the Single Supervision and Single Resolution of Banks are key for retail investors and individual shareholders
1) It is important to realise that individual shareholders and retail investors: are paying twice for bank crisis: they suffer wealth losses + have to pay as taxpayers.
And sometimes not only retail shareholders and bondholders but even depositors! (for example in the Cypriot bail-in proposal[1]). We deem the temptation of involving insured depositors in bail-ins as completely unacceptable; no matter the name you give to it (either a bail-in or a special “tax” on deposits as proposed in Cyprus, just to circumvent the Deposit Guarantee Scheme Directive norms).
We have to take into account the huge social cost of banking resolutions that do not respect the rights of individual shareholders, and concretely the cost for the legal system: The best example is EuroFinUse’s Spanish members seeking redress through huge class actions for BANKIA hundreds of thousands individual shareholders. Above all it is necessary to focus on the prevention of these cases.
2) Avoid any case of discrimination of concrete groups of equity holders: Example - bondholders’ sovereign bonds holders in Greece (pension funds exempted from the PSI[2]): Need of coherent, consistent and widely accepted and understood rules by all market participants. We must remember that we do not count yet with an EU-wide class action: this is another huge source of possible discrimination for small European investors depending on which EU jurisdiction they reside.
What to do?
Besides a strong SSM and SRM:
1. We would like to advocate for a reduction of the European Union’s over-reliance on the intermediated finance could in order to decrease the pressure onto the newly created SSM and SRM, especially taking into account the upcoming stress tests to be performed by the EBA and ECB .
It is necessary to ensure same pre-contractual information documents (‘KIDs’) for all investment products available at retail level in order to encourage citizens for direct investment into EU companies. We must also look closely at the debate of the remuneration of financial advisors under MiFID II.
2. Financial Repression: The Cypriot bail-in proposal is just another example. We should look at the broad definition of financial repression e.g. all measures aimed at eroding the financial wealth of households to the benefit of third parties, not only at the “narrow” definition[3].
3. Last five years (2009-2013): saving the big banks. EU policy focus/obsession on “financial stability”. No exclusive regulation aimed at retail / small investor except the KID regulation. Next five years (2014-2019): let’s focus on those
CONCLUSIONS
-Need of clear rules accepted and understood by all market participants and especially by the investor community;
-Especially need of pre-defined rules to be applied in Banking crisis and not overrun by opaque agreements between national governments and international creditors, where most powerful interest groups can lobby to get preferential treatment (e.g. Troika impositions on Cypriot deposits, pension funds exclusion of the Greek PSI);
-We feel that the discussions between the Commission, Council and Parliament are generally aligned with the aforementioned needs for financial services users;
-That is why we believe that the Single Resolution and Supervisory Mechanisms, for what we could hear, goes in the required direction;
-We need not to forget that the protection of retail investors should be a priority for the upcoming Commission and Parliament after the current mandate, exclusively dedicated to financial stability.
Please find here the video of Juan Manuel Viver's speech.