Everybody wants to be a hero.
As the pandemic wreaks havoc on the economy, people as well as businesses need help getting through the financial pain.
Regulators are already warning that borrowers are at risk of being treated unfairly when COVID-19 payment holidays come to an end. Households also need to earn more on their savings, at a time of low interest rates and strains on pensions.
Mairead McGuinness pledged to advocate for citizens and put the “heart” into financial services in her bid to join the European Commission in charge of that portfolio. That pitch won her the European Parliament’s confirmation to take office on Monday.
Stéphanie Yon-Courtin, a French liberal EU lawmaker, said she found McGuinness “convincing” during a confirmation hearing last week, and she trusted that the Irishwoman would bring “a new level of ambition” to consumer protection.
“She managed to bring to life these often technical issues by making it close to European citizens” — MEP Stéphanie Yon-Courtin
“She managed to bring to life these often technical issues by making it close to European citizens,” Yon-Courtin said in an interview.
Brussels’ role
Yet Brussels is not the easiest place from which to drive consumer protection, even with the best intentions.
For one, the Commission has wielded little power over retail financial services. While the European executive body has set a base level for consumer protections around the bloc, applying the legislation — and enforcing it — remains in national hands.
Past initiatives to hand more power to the EU’s financial agencies have met with resistance from countries protecting their domains in policing local markets. At least the collapse of Wirecard may create some impetus for more central supervision.
Another challenge to raising financial protection is the loss of the EU’s most aggressive regulator on consumer matters: the U.K’s Financial Conduct Authority.
“[The FCA] was and is a consumer champion,” said Guillaume Prache, managing director of Better Finance, which advocates on behalf of European savers in Brussels.
The U.K. watchdog has for instance fined closet index funds — which charge higher fees as if they’re hand-picking stocks but in practice just replicate market benchmarks — and required compensation for savers. No EU27 country has taken such action, Prache said in an interview.
In recent days, the FCA also announced plans to ban the sale of crypto derivatives to consumers to protect them from losses.
Wish list
Within the bounds of the Berlaymont, McGuinness can still make a difference for armchair investors with changes to EU legislation.
In her new role as commissioner, Mairead McGuinness wants to put financial consumers first | Alexis Haulot/European Union
Prache warned that warm words on retail investment have not previously translated into benefits for savers, who have struggled to earn money from record-low interest rates since the last financial crisis.
“We will assess on facts,” he said of McGuinness. “She had very strong priorities set for putting financial consumers first, so let’s see.”
Brussels’ recent attempts to encourage retail investors into financial markets should be more ambitious, in Prache’s view.
A Commission action plan for capital markets was disappointing, he said, for watering down pro-consumer recommendations from an expert advisory group — like steps to encourage employee share ownership of companies.
McGuinness promised to champion borrowers during her hearing, invoking her country’s experience during the global financial crisis.
To make real headway on consumer protection, advocates put one item atop their wish lists: a ban on inducements.
The term refers to the commissions that fund managers and insurers often pay to financial advisers for recommending their products. Consumer bodies criticize those payments as kickbacks.
Europe’s revised Markets in Financial Instruments Directive (MiFID) bars advisersRead More – Source
