April 2017 – In response to the 2008 financial crisis, policy makers have been focusing heavily on “financial stability”. At the same time, individual savers and investors have been subjected to varying degrees of Financial Repression and the protection of EU citizens as investors, savers and financial services users has not been a priority. Customer protection actually ranks sixth and last of the objectives of the new European Supervisory Authorities created in 2010.
Today, with consumer trust in financial services and products still at an all-time low across the EU, BETTER FINANCE cautiously welcomes some positive signs from policy makers indicating a possible shift of priorities from financial stability to consumer protection.

It is BETTER FINANCE’s overarching priority to ensure that this renewed dedication to the protection of individual European savers and investors remain at the top of the agenda of European financial policy makers. Crucially, the wellbeing of financial end-users relies on the willingness and ability of EU politicians and regulators to balance the interests of financial intermediaries with those of the financial users in the real economy: issuers of equity and debt on the one side and savers and investors on the other. Over the recent decades the European economy evolved into a financial type of capitalism where the link between savers and the real assets in which their funds are deployed has been loosened, and where decision-making power has increasingly shifted to financial intermediaries as “agency” owners (“other people’s money”) instead of beneficial owners or end-investors.

To restore confidence in financial markets, promote an open, transparent, efficient and sustainable funding of the economy and ensure the effective protection of financial consumers, BETTER FINANCE’s priorities focus on public policies on the one hand and actual enforcement of those policies on the other

1. Unified, transparent, liquid, fair and accessible capital markets to the benefit of end-investors and the real economy

The role of capital markets is to provide adequate and attractive funding for real economy issuers of equity and debt, while providing end-investors with a decent and sustainable return on investment. But in Europe the role of end-investors – individual ones in particular – has declined dramatically over recent decades due, in part, to the publicly favoured development of fee-laden “packaged” products sold by financial intermediaries who still leave most of the investment risks to their clients. Similarly EU non-financial real economy issuers of equity and debt have been crowded out by financial institutions, which are now the biggest issuers in Europe after the governments.  Fortunately, policy makers are now becoming more aware of these realities thanks to the “Capital Markets Union” initiative launched by the European Commission.

Sixty years after the Treaty of Rome a “common market” for capital and for financial services is still nowhere in sight except for few exceptions like UCITS funds. The high fragmentation of capital and financial services markets – especially for individuals – is causing a lot of detriment to real economy users. In particular, tax discrimination against cross-border savers and investors inside the EU are still widespread and must be dismantled.

Key policy initiatives/campaigns: #CMU #MIFID II

2. Improved and more consistent investor and consumer protection across all retail financial products in the EU underpinned by effective redress for all EU citizens

The lack of trust of users of financial services, particularly in pension and investment products and mortgages, is at least partly due to a plethora of mis-selling scandals, frequently exacerbated by the fact that there is little or no possibility of redress for abused investors, savers, policy holders of insurance contracts and other users. Financial services users also suffer from an inconsistent regulatory framework and supervision that are inadequate to ensure their protection.

Further improvements to the governance, effectiveness and efficiency of the ESAs – EBA, EIOPA and ESMA – are paramount to ensure that the ESAs are able to effectively contribute to building the Capital Markets Union, to further progress towards supervisory convergence and towards better enforcement to enhance consumer protection in the internal market.

Therefore we believe that strengthening and harmonising protection rules and their public enforcement, and developing effective Europe-wide collective redress schemes allowing shareholders and other investors and savers to get compensation for losses and damages, is crucial.


3. Better governance of publicly listed companies and pension and investment funds by facilitating the engagement of minority shareholders and  fund participants  

We believe that it is possible to prevent many of the problems that affect shareholders and society as a whole by improving corporate governance and business culture in the EU and ensuring that small and minority shareholders have a say in the most important decisions of companies. In the same sense, the voice of pension fund participants has to be heard and they have to be appropriately represented in the supervisory bodies of private pension schemes.

Key policy initiatives/campaigns: #SHAREHOLDER RIGHTS #EUROVOTE #ESG #SRI

4. A Capital Markets Union that will restore retail equity investments to their proper place, whilst improving the long-term net returns of intermediated investment products

For too long individual investors and savers have been crowded out of equity markets and pushed into frequently under-performing packaged products. The fragmentation of equity markets has meant that individual savers and investors have, for all intents and purposes, been limited to data on, and transactions in, regulated venues, while the larger part of transactions are now being executed in the ‘dark’ by “professional” players. The CMU provides the opportunity to promote equities as a simple, cheap, liquid and transparent long-term investment tool and to end their discrimination at the retail point of sale. It should, for example, be avoided that life insurance companies have a privileged access to CMU investments. Instead the consumer himself should get a more direct and cheaper opportunity to invest in CMU activities. Simultaneously – and in particular in an era of low returns – it is important to reduce the costs charged by intermediaries who stand between the investor and the companies operating in the real economy and address the acute lack of adequate, clear and reliable information on the performance and price of packaged investments.

Key policy initiatives/campaigns: #CMU #PROSPECTUS #PRIIPS #LONG-TERM #PENSIONS #PEPP