News

On Monday 28 September UNI Europa Finance (UEF), represented by President Edgardo Iozia, Vice-President Michael Budolfsen, Regional Secretary Europe Oliver Röthig and Policy Officer Morten Clausen, had a meeting with the EU Commissioner for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), Jonathan Hill.

At the meeting several topics were discussed and general introductions were made, as this was the first meeting between UEF and the Commissioner. From UEF’s side this included expanding on the perspective of the employees on the topics of sales pressure and variable remuneration, effects of the new legislation having come into effect and the Capital Markets Union (CMU) action plan. From the Commissioners side this included specifying his views on how and for whom financial legislation should be created and revised. In the Commissioners own words, he finds it important to hear from civil society and in particular from consumers’ organisations, as he always puts the needs of the consumers first when considering financial legislation, be it SMEs or retail investors. He specified, that his aim with legislation was to create stability in a growth-friendly way, as the lack of jobs and growth is the biggest threat to the financial stability of the European economy at the moment.

Work programme

During the meeting, the Commissioner revealed parts of his work plan for the coming six months, which will include a revision of the securitisation directive following advice from the ECB; a proposal for a Central Counter-Part (CCP) recovery resolution mechanism; a call for evidence focused on how effective the financial regulations that have been implemented have turned out; and a proposal on a European deposit saving scheme.

Sales and advice

On the topic of sales and advice, it was commonly agreed that excessive sales targets are a problem in the financial sector and that this is to the detriment of the customer. However, where UEF sees stronger worded regulation as the way to go to avoid these problems, the Commissioner expressed a more cautious approach. In his view, more rules sometimes leave employees taking less responsibility and he would like to have a more “value- than rules-based” approach to regulation. As he expressed it, he wants consumers to trust the products they buy. Hence, regulation need to be tailored to still encourage development of personal responsible sales ethics and ownership of responsible client relations. UEF agreed that it can be difficult to regulate behaviour and practises in all details and proposed increased demands for transparency, giving customers, regulators and civil society possibilities to see, how the sector actually do business, when it comes to remuneration models, collective agreements, sales targets, price and commissions etc.

Furthermore the issue of how good advice will be given in the sector in the future was raised. As was pointed out by the Commissioner, the purchase of financial and insurance products increasingly happen online, decreasing the need for physical consultations with advisors to take place. This is especially prevalent in the UK, according to the Commissioner. However, as UEF expressed, there would still be a need for advice to be given to the customer at some point in the process. Especially in light of the fact that in general, the financial literacy of the population was still not always on a level where they could be expected to understand all the intricacies of some products. This problem was underlined by the example of internet-based crowdlending, where people can invest directly in unlisted companies without any advice at all – in sharp contrast to the regulated banking sector, where advice before investment is compulsory. This transfers the risk to the individual customer. The Commissioner was aware of these points, he would like to encourage crowdfunding to be picked up and would continue to oversee this area, working with Member States to put in place appropriate safeguards and promote best practices.

Pluralism and diversity

Another cornerstone of UEFs concerns that was brought up, is the need for a diverse finance sector. In order to meet as many needs as possible and create more stability in the financial sector, it is UEF’s firm belief that diversity must be preserved and promoted through legislation. This was clearly a view shared by the Commissioner and something that he will be focusing on in the future.

Sustainable finance

Linked to the previous point, the UEF project on a sustainable and responsible financial market, which is linked to the social compact was also brought up in the meeting. This was approached with interest from the Commissioner and UEF had the opportunity to elaborate on the idea of having a specific initiative emanate from the Commission, which would involve as many stakeholders as possible, and focus on how to make the financial markets more sustainable in the long run.

CMU

On the topic of the CMU, which is one of the main focus areas of the Commissioners work at the moment, the topic of new avenues of funding was discussed, particularly crowdfunding and direct investment. It was explained from the Commissioners side, in response to UEF’s voiced concerns over investor guarantee, that he was in favour of allowing this type of funding to grow for a while before beginning to regulate it. This is because the Commissioner wants to make sure the new market will not be smothered at birth by heavy regulation, given there in his view is a clear need for these new types of funding.

ECB

UEF also raised the issue of how the integration between EU supervisory and national supervisory authorities is facing problems at the ECB. As the ECB employees are on one type of contract, while the national employees are on others, this leads to tensions when working together and raises questions of the effectiveness of these joint supervision teams. It was clarified by the Commissioner that he was aware of the problem and would monitor the situation closely.

Conclusions

On a whole, the meeting was a very positive first step. It clearly showed, that while there may be some disagreement between the Commission and UEF on the specific way the financial sector should be regulated, there is a common understanding of needs and problems and a mutual wish to listen to each other in order to move forward in closer cooperation. This understanding will most likely be expressed in a video message that the Commissioner will prepare for the UEF conference in Antalya in October. Of especial importance is also the Commissioner’s final remark, that another meeting should be arranged in some months to discuss these matters more in depth and encouraged UEF to present concrete proposals at this meeting. These would include plans on how to stimulate diversity of the sector, promote job creation and generate growth at large in the European economy.