Page 72 - EBA 2015.1815 Annual report 2014 web 2

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E U R O P E A N B A N K I N G A U T H O R I T Y
70
Consumer Protection and
Financial Innovation
Developments in the markets for financial
services in recent years have shown that fail-
ures in the conduct of financial institutions
towards their customers can cause not only
significant consumer detriment, but also se-
verely undermine market confidence, financial
stability and the integrity of the financial sys-
tem. In order to address the causal drivers of
conduct failure and in line with Article 9 of its
regulation, the EBA continued in 2014 to pro-
mote transparency, simplicity and fairness of
the market for consumer financial products or
services across the internal market. The EBA
monitored new and existing financial activities
and adopted guidelines with a view of promot-
ing the safety and soundness of markets and
the convergence of regulatory practice.
According to its tasks envisaged in Article 9 of
the EBA regulation, the EBA’s work is sepa-
rated into protecting consumers on the one
hand and monitoring financial innovation on
the other. The EBA helps to ensure that all
consumers in the banking sector are treated
fairly and protected from harm in a consistent
way across the entire EU.
In protecting consumers the EBA focuses on
payments, pre-sale, point of sale and post-sale
requirements. While financial innovation is an
important part of markets the EBA works hard
to recognise and monitor innovative products
and services to ensure consumers, investors
and depositors are protected. (
24
)
Protecting consumers
The EBA’s consumer protection remit extends
to all retail banking products that fall within its
scope of action, this includes mortgages; per-
sonal loans; payment services, including cred-
it/debit cards; deposits, including structured
deposits; payment accounts and electronic
money. In 2014, the EBA issued regulatory
products across the life cycle of the product,
i.e. at the pre-sale, point of sale, and post-sale
stages of the interaction between the consum-
er and the financial institution.
Pre-sale requirements
The EBA has developed and consulted on
detailed guidelines on product oversight and
governance arrangements for retail banking
products. These guidelines aim to address
some of the causal drivers of failures in the
conduct of financial institutions towards their
customers that can cause not only significant
consumer detriment but can also result in di-
rect costs for financial institutions. The Guide-
lines are a result of redress and compensation
pay-outs, penalties, fines, and loss of income
and following the initial work carried out by the
Joint Committee of the three ESAs 2013, The
guidelines require the establishment of inter-
nal arrangements for the design, marketing
and life cycle maintenance of products and are
aimed at ensuring that products are designed
to meet interests, objectives and characteris-
tics of the target market. They apply to manu-
facturers of retail banking products as well as
to distributors.
(
24
) Please note that a number of products in this area
have been developed jointly by the three ESAs, and
are also mentioned under the section on cross-
sectoral work, p. 75.