In order to provide quality research, assessment and analysis of current policy issues relevant to financial services users BETTER FINANCE has presently set up five individual Working Groups. Their purpose is to inform consultations and studies with expertise, knowledge and best practice examples.
Current Working Groups cover the following policy areas:
BETTER FINANCE and EU citizens as pension savers and individual investors, by their very nature, are strong supporters of ‘sustainable finance’: they are parents and citizens who want to leave a greener and better planet for their children, whose main saving goals – such as retirement, housing and transmission of wealth – are long-term oriented and need a sustainable economy and environment. Besides addressing crucial environmental issues, the concept of sustainable finance should translate into products that are exemplary in complying with EU investor protection rules. An investment product can be as ‘green’ or ‘sustainable’ as you like, individual investors will not entrust their savings to such products if they do not address their primary need of sustainable long-term value creation.
Financial education is a crucial component of the empowerment of consumers/investors and gives individuals an understanding of how to manage their finances in the real economy in order to avoid unnecessary risks, excessive debt and possible financial exclusion. Moreover, it enables people to improve their understanding of the financial opportunities that the products, which are available to them, may offer. While financial education is crucial, it should clearly not relieve financial institutions of their role of providing individuals and businesses with effective, clear and comprehensible information before contracts are concluded. In addition, the financial industry is accountable for ensuring, through on-going training and education, that employees of the sector, especially those who are in direct contact with customers, have the appropriate competences and qualifications to present in a plain and understandable manner, the products they offer and act in the interest of the client.
Good principles of corporate governance and their proper implementation in all listed companies, is of vital importance for their long-term survival, growth and stability, ensuring the long-term interests of shareholders is not overlooked, and for the stability and sustainable development of the economy and the financial system. We believe that many problems of corporate governance arise from a failure of one of two conditions: broken links in the governance chain between directors and shareholders (the “agency” and depositaries processing chain problems), and the fact that shareholders – those who control the company – are not necessarily beneficial owners – those who carry the economic risks and rewards of ownership.
Read our position paper on Corporate Governance.
Pension funds in the EU benefit from the principles of free movement of capital and free provision of services. This means, for example, that pension funds can manage occupational pension schemes for companies established in another EU country, and pan-European companies can have a single pension fund for all their subsidiaries throughout Europe. This freedom is counterbalanced by rigorous prudential standards, ensuring that pension fund members and beneficiaries are properly protected.
Read our position paper on Pensions.
The retail investment market is largely dominated by “packaged retail investment products” (PRIPs) which provide retail investors with easy access to financial markets. PRIPs include investment funds also better known as UCITS (Undertakings for Collective Investment in Transferable Securities). The regulation of sales and advice is dominated by two major pieces of legislation, Markets in Financial Instruments Directive (MiFID) and the Insurance Mediation Directive (IMD). These provide retail investors with easy access to financial markets, but can be complex for investors to understand and very often associate abusive commercialisation fees to be paid by the retail investor. Those selling these products can also face conflicts of interest since they are often remunerated by the product manufacturers rather than directly by the retail investors. A complex patchwork of regulation has grown up to address these risks, and inconsistencies and gaps in the patchwork have raised concerns as to the overall effectiveness of the regulatory regime, both in relation to its capacity to protect investors and its ability to ensure the markets work efficiently. These concerns have been further heightened by the impact of the financial crisis.
The Directive 2002/92/EC of the European Parliament and the Council on insurance mediation regulates the point of sale of insurance products so as to ensure the rights of the consumer. Current and recent financial turbulence have underlined the importance of ensuring effective consumer protection across all financial sectors. The revised Directive (IMD2) seeks to improve regulation in the retail insurance market in an efficient manner. It aims at ensuring a level playing field between all participants involved in the selling of insurance products and at strengthening policyholder protection. The overarching objectives of the current review are undistorted competition, consumer protection and market integration. In concrete terms, the IMD2 project should achieve the following improvements: expand the scope of application of IMD1 to all distribution channels (e.g. direct writers, car rentals, etc.); identify, manage and mitigate conflicts of interest; raise the level of harmonisation of administrative sanctions and measures for breach of key provisions of the current Directive; enhance the suitability and objectiveness of advice; ensure sellers’ professional qualifications match the complexity of products sold; simplify and approximate the procedure for cross-border entry to insurance markets across the EU.
Read our position paper on Insurance.
Audit & Financial Reporting
The audit market has proved to be fundamental for guaranteeing long-term shareholder value. The financial crisis revealed the necessity to upgrade the EU regulatory framework for auditors, and after an ambitious Proposal from the Commission the European Parliament is currently discussing a new Directive and Regulation. The envisaged Audit Reform should enhance the quality of statutory audits in the EU and restore confidence in audited financial statements, in particular those of banks, insurers and large listed companies.
Read our position paper on Audit.