EU regulators must have the power to stop financial firms from selling toxic products that could trigger another crisis, industry watchdogs said this week, stepping up pressure on the European Commission to do more to protect retail investors.
“We need legislation that deals with . . . how products are manufactured and intervention powers,” said Salvatore Gnoni, responsible for ESMA’s investor-protection policies at an event at the EU Parliament in Brussels.
The comments come as the commission is weighing whether to revamp the bloc’s rules on retail finance, an initiative that would build on the revised Markets in Financial Instruments Directive. But there’s no guarantee that ESMA will be granted the extensive powers it’s seeking. Mifid mandated the agency to provide advice on the rules, but the commission gets the final say.
“We haven’t done enough,” said Katja Würtz, head of consumer protection at the Eiopa. As evidence, she noted that the commission has only recently published a discussion paper on an overarching policy for retail finance.
BETTER FINANCE says it’s crucial for ESMA to be granted the proposed powers and to enforce them consistently to drive change in Europe’s corporate and financial culture. Indeed, Guillaume Prache, Managing Director at BETTER FINANCE, said that ESMA should also be allowed to monitor the institutions that develop what he called “toxic products.” “Aspirin is preapproved by regulators but no financial products are preapproved. And these products can be more complicated than some drugs, ”Prache said. “We need to be able to put warnings on these products,” he continued. “Hopefully ESMA will get those powers in Mifid II.”
Würtz also said that the main change would have to come from the financial institutions themselves, especially when it comes to selling practices and the overall appetite for selling as many instruments as possible.
Source: Retail investors must be protected from toxic instruments, EU regulators say; 29 January 2016; mlex - market insight; Bjarke Smith-Meyer