ESBG s Position Paper on the Commission Consultation on Bank Accounts ESBG (European Savings Banks Group)

Transcription

1 ESBG s Position Paper on the Commission Consultation on Bank Accounts ESBG (European Savings Banks Group) Rue Marie-Thérèse, 11 - B-1000 Brussels ESBG Register ID June 2012

2 Doc 0675/2012 RDE/LGU/MIS ANSWERS TO QUESTIONS Question 1: Do you consider that the information provided by banks on bank account fees is presented to consumers in a sufficiently clear manner and easy to compare between banks? What good practices could you identify? What are the persisting shortcomings? Do you think that amendments to the transparency obligations in the Payment Services Directive (2007/64/EC) could address those shortcomings? The EU legislation currently in force, coupled with national and self-regulatory measures provides a solid ground for the transparency and comparability of bank fees. ESBG believes that the current provisions of the Payment Services Directive (PSD), the national legislative and self-regulatory measures taken by public authorities and non-profit organisations, are sufficient. No further EU legislative measure is necessary. Should further measure be proven to be necessary, proportionate and cost-effective, sufficient flexibility should be left at national level. ESBG strongly encourages the Commission to carry out an objective and balanced assessment of all evidence at hand, as well as a cost-benefit analysis, before any policy decisions be made concerning transparency and comparability of bank account fees. According to ESBG s impression, and based on evidence, the Commission failed to be well-balanced in its analysis. ESBG members are committed to continuously improve the transparency and comparability to follow nationally the evolving needs of consumers. The developed draft Principles on transparency and comparability of personal current account fees have indeed been based on identified good practices and would have effectively assisted European consumers in accessing, understanding and comparing information on bank account fees. Question 2: Do you think that standardising bank account fee terminology could help to provide more transparent and comparable information on fees? If terminology were to be standardised, should that standardisation cover all fees or only some of them? If only some of them, on the basis of which criteria should they be chosen? Should terminology be standardised at national or EU level? 2

3 The use of common terminology should be performed at national rather than European level, based on the specificities of the national markets, and can add value only if restricted to the most common services. The savings banks industry is willing to work on defining a common terminology at national level. This common terminology would refer to services, not fees and should not mean a standardisation of products in any case. It should also be limited to the most common services identified. Indeed, even with the use of common terminology of the most common terms, banks should be free to portray their identity towards the consumer by using brand names, especially for marketing and advertising materials. Maintaining the ability to use brand names is also beneficial for consumers, who may be more familiar with the brand names. Banks must be allowed to differentiate their offer from other banks as long as it is clear to the consumer what service is concerned. This is crucial for competitiveness and a diversified market which is in the customer interest. Question 3: Do you think that glossaries of terms and standardised lists of bank fees would facilitate comparability? If so, what format and content should this information have? What body/forum would you consider appropriate to develop such a glossary/standardised list of fees? For the glossaries to be useful for the end-user, and to allow comparison, they have to be concise. Thus, ESBG considers that any glossaries should cover a well-identified number of most typical services used by customers. Therefore, the related vocabulary must be developed nationally, possibly in cooperation with other stakeholders. We further stress that their use should not impose any form of product standardisation as continued freedom to develop and offer innovative and economic products to customers is essential. Finally, credit institutions should not be obliged to provide glossaries to their customers. It should suffice, when additional information is made easily available that consumers are informed how to access the information. This will help to avoid unnecessary costs for credit institutions. Question 4: In order to further increase bank account fee transparency and comparability, which of the following tools should be considered: i) comparison websites managed by public authorities ii) standardised cost simulations to be provided by banks iii) standardised representative examples to be provided by banks iv) surveys by consumer organisations/financial ombudsman v) any other tools you consider relevant? Should any of them be made compulsory? What would be the likely costs? 3

4 European savings and retail banks are focusing on providing a quality service and are not orientated on a pure price-based competition. There are many elements of service that may be important to the consumer and influence their preferences, such as a close branch network, advisory quality, distribution structures, online banking services, innovative technology, quality of the service, to name only a few. If the price is seen as the only distinctive mark, consumers might get a false impression, that all bank accounts are more or less the same. This might be misleading for consumers as they might choose a model that does not fit their personal needs. Furthermore a pure price-based comparison has adverse effects on credit institutions that - as savings banks - offer their customers many additional services. Therefore, the focus on the price might distort competition. Comparison websites, whose independence should be guaranteed, should encompass other parameters and should not be limited to fees only, so that they are correctly informing customers. ESBG also believes that comparison websites might be run by public authorities or independent bodies. What is important is that appropriate mechanisms are ensured to monitor the quality of the comparison service provided. Timeliness is also critically important. Regarding standardised cost simulations, ESBG reminds the Commission that standardised cost simulations imply high costs as there is no such thing as an average/typical/standard consumer. There are as many customer behavioral patterns as there are customers themselves. Therefore in order to have a workable standardised cost simulation the amount of input and statistical information will be huge and costly to implement. It should also be born in mind that examples could be representative for some consumers, but not for others (for those, they might even be confusing). Therefore the usefulness of standardised cost simulations is relative. Question 5: What level of detail should the information on actual fees paid have and how frequently should it be provided to the account holder? Would having comparable information on the fees actually paid encourage consumer mobility, including on a cross-border basis? ESBG considers that the current provisions of the PSD, with the options for Member States on periodic disclosure, coupled with national legislative and self-regulatory measures and actions taken by public authorities and non-profit organisations, provide a solid ground for the transparency and comparability of bank fees (see answer to question 1). Following the entry into force of the PSD, all savings and retail banks already fulfil the requirement to provide ex-ante and ex-post information. The PSD introduced an obligation on all payment services providers to provide the user (i.e. the consumer) with information on the charges for the payment transactions before and after the execution of the payment, including the information on actual fees paid and the frequency of the information provided. On these grounds there is no reason to impose any further obligations on credit institutions. Lastly, ESBG considers that cross-border consumer mobility is more affected by language barriers, cultural differences, and fiscal barriers of Member States. The level of detail of the ex-post information on fees should simply depend on the structure of fees paid by the consumer. Last but not least, it appears very important for consumers that a branch of the account-keeping credit institution is near their place of residence. From our point of view, it seems to be precluded 4

5 that any measures on transparency of costs might encourage customer mobility on a cross-border basis. Question 6: What other measures/instruments should be considered in order to improve the transparency and comparability of bank fees? Please describe and indicate at which level (national or EU) you consider they should be taken. The current EU legislation provides a solid ground for the transparency and comparability of bank fees at national level. Since the measures are relatively new, ESBG does not consider that, at this stage, further EU legislative proposals would be appropriate, by amending the PSD or otherwise. Should any further measure be deemed necessary, a sufficient flexibility should be left at national level. ESBG welcomed the fact that the national approach addressing retail banking issues was taken by Commission representatives during the 2010 European Consumer Summit, as well as in the Commission s letter of 20 October 2010, in which the Commission explained its expectations from the ESBG self-regulation, where it is stated that the solutions should be developed and implemented at national level. ESBG strongly recommends maintaining this line of thinking because during the work which followed this invitation it became even more apparent that finding a common denominator at EU level would not be possible it is challenging enough at national level. On this occasion, we would like to stress that consumers and non-profit organisations also have an important role to play in parallel to the efforts made by the banking industry and actions taken by legislators and enforcers. The 2012 study on bank fees finds that they [consumer organisations] appear well informed about the personal current account markets, consumer behaviour. Thus, while banks fully appreciate their responsibilities, the role of consumer organisations and public authorities should not be neglected. Finally, ESBG would like to stress the need for financial education. This element is also part of the grand scheme of improving transparency and comparability for consumers. Question 7: Do banks in the Member State where you have a bank account offer a switching service? If yes, is it in line with the Common Principles on bank account switching described above? Is information on the conditions of switching presented in a consumer friendly manner? In January 2008, the Commission invited EBIC to develop principles for banks conduct if a consumer wishes to switch his personal current account. These Common Principles were formally adopted by EBIC, acknowledged by the Commission and have therefore effectively been implemented from 1 November Question 8: If a switching service in line with the Common Principles is offered by banks in the Member State where you have a bank account, does it remove all obstacles to bank account switching? If not, what obstacles remain? Provide examples of good practices and persisting obstacles encountered. Yes, it does remove all obstacles. Some further time might be needed to let the service demonstrate its effectiveness. 5

6 Making the switching procedure easier does not necessarily translate into higher customer mobility. Banks and customers build a long term relationship which often results in a low mobility rate due to the consumer s trust and satisfaction 1 ESBG also noted shortcomings in the methodology used in conducting the mystery shopping exercise, published by the European Commission, which says that 8 out of 10 mystery shoppers faced difficulties when switching bank accounts. Among these, there were a very low number of respondents from large countries. Some questions were asked which go further than the Common Principles and contradictions between the results of the Consumer Market Study and those of other studies, including a recent Eurobarometer study (February 2012). It is worthwhile acknowledging that the latter study covers a much larger sample of the European population and therefore is expected to provide more reliable conclusions. Its main findings are as follows: Among European current account holders, 85% have not switched or tried to switch as they do not need to, while 7% say they switched and it was easy and [only] 3% say they have not switched or tried to switch as it is too difficult or too much hassle. Just 1% switched and found it difficult, with another 1% saying they tried to switch but gave up. Question 9: Should the Common Principles remain voluntary? What do you consider are the advantages or disadvantages of making them compulsory at EU level? What would be the likely costs? EBIC Common Principles should remain voluntary. ESBG believes that the Common Principles allow enough flexibility so that individual Member States can continue using their different systems switching services, legal and technical constraints. In view of these differences, ESBG believes that it would be difficult to have compulsory switching principles at EU level. While the efficiency of the process could still be improved, this will be driven by a better awareness and better communication between the interested stakeholders and not by imposed legislation as such. Question 10: Should switching principles/measures also cover cross-border switching of bank accounts? The Common Principles should not be extended to cover cross-border switching of bank accounts. It is felt that because of the nature of account switching, it should only apply at national level. This is particularly so in the absence of any data suggesting that there is latent need for such approach. Implementing a set of common principles for cross-border switching in the future would, in any case, require significant cost-benefit evidence in order to be justified.. Question 11: According to you, how important is the risk of having receipts, bills and payments misdirected when switching bank accounts? What measures could be considered to make the switching process safer? 1 See for example: Commission Staff Working Document, SEC (2007) 106, 31 January 2007: it is likely that a large proportion of banking customers probably the majority in most Member States would describe themselves as satisfied with their current bank. ; additionally see Expert Group on Customer Mobility in Relation to Bank Accounts where studies concerning customer satisfaction are illustrated, allocating a customer satisfaction up to 94%. 6

7 ESBG is convinced that the EBIC Common Principles help to facilitate effective switching. Any problems that may occur due to receipts, bills and payments misdirected when switching bank accounts, may be due to the variety of participants. We therefore believe that better awareness and better communication between the parties (banks, customers and providers) could improve both the efficiency of the process and the perception of customers about switching. Question 12: What obstacles, if any, are still faced by account providers that are smaller or established in another Member State to expand their client base or to enter new markets? Are these connected to problems with switching facilities? These obstacles are much wider than considerations related to bank account switching. Obstacles include: 1.) high costs to build a brand, trust and a branch network; 2.) the necessity of translating documentation for consumers of different nationalities. Question 13: What other measures should be considered to improve bank account switching? Please describe. EBIC s Common Principles were first implemented in November They were the first common standards on bank account switching providing a benchmark for all Member States. As the Consumer Market Study on consumers experiences with bank account switching rightly points out, the Common Principles outline the right approach to simplify the switching process. Notably, where the Common Principles are used, consumers consider the process to be running smoothly. 2 In some areas progress is still ongoing and further work is being carried out. Therefore, ESGB considers that no further measures are necessary or have to be considered to improve bank account switching. Question 14: Do you dispose of information on consumers encountering difficulties in access to a basic bank account? What types of obstacles are signalled by the consumers preventing them from having access to a basic bank account? ESBG believes that financial exclusion forms part of a much wider social exclusion problem. However, it is appropriate to differentiate between consumers unable to obtain access to a bank account, and those who do not wish to have one. Against this background, voluntary social exclusion cannot be easily removed through legislation. However, national authorities, in cooperation with the relevant stakeholders, including ESBG members, are best placed, in respect to the principle of subsidiarity, to take adequate measures adapted to their local specific situations. Question 15: Are you aware of any measures taken by banks or other institutions in the Member State where you have your residence to facilitate access to a basic payment account? Have these initiatives been successfully enforced? 2 GfK Final Report Consumer Market Study on the consumers experiences with bank account switching with reference to the Common Principles on Bank Account Switching, p

8 It is important to acknowledge that the initiatives adopted by the industry meet the needs of different European markets by taking into account the different rates of market penetration and levels of financial inclusion of the population. Question 16: Do these measures also facilitate access to a basic payment account for nonresidents? In general, it is important to make a distinction between the social (access to BPA) and internal market (cross-border access for EU residents) policy approaches. In our view if the very purpose is to combat financial exclusion, a basic bank account should be granted only to unbanked European residents consumers. In addition ESBG believes that with the purpose of combating financial exclusion, a basic bank account should be granted with adequate compliance to Anti-Money Laundering legislation, and with at least an objective economic link with the country in which they want to open an account. Question 17: If consumers still have difficulties in opening a bank account, what are the reasons for that? Please refer to the answers provided to Questions 14 and 16. Question 18: If more needs to be done what additional measures should be envisaged? Should the problem be tackled at national or EU level? ESBG believes that in the wider context of the fight against social exclusion, all actors in society (public authorities, industry, NGOs, consumers, civil society, Trade Unions) should work together towards achieving common solutions to fulfil this responsibility. 8

9 About ESBG (European Savings Banks Group) ESBG The European Voice of Savings and Retail Banking ESBG (European Savings Banks Group) is an international banking association that represents one of the largest European retail banking networks, comprising of approximately one-third of the retail banking market in Europe, with total assets of over 7,470 billion, non-bank deposits of 3,400 billion and non-bank loans of 4,000 billion (31 December 2010). It represents the interests of its members vis-à-vis the EU Institutions and generates, facilitates and manages high quality crossborder banking projects. ESBG members are typically savings and retail banks or associations thereof. They are often organised in decentralised networks and offer their services throughout their region. ESBG member banks have reinvested responsibly in their region for many decades and are a distinct benchmark for corporate social responsibility activities throughout Europe and the world. ESBG - Association internationale sans but lucratif/internationale vereniging zonder instoogmerk/ International not-for-profit association Rue Marie-Thérèse, 11 B-1000 Brussels Tel: Fax: info@savings-banks.eu Published by the ESBG, January