Your Ref., Your message dated Our Ref., Official in charge Extension Date. BSBV 24/ th 2007 Dr.Rudorfer/Ob

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1 EU Commission Bundessparte Bank und Versicherung Wiedner Hauptstrasse 63 P.O. Box Vienna T +43 (0) Ext F +43 (0) E bsbv@wko.at W Your Ref., Your message dated Our Ref., Official in charge Extension Date BSBV 24/ th 2007 Dr.Rudorfer/Ob GREEN PAPER on Retail Financial Services in the Single Market The Bank and Insurance Division of the Austrian Federal Economic Chamber as statutory representative of the interests of the entire Austrian banking industry and insurance industry would like to comment as follows: I. General comments Need for targeted accurate regulations In this connection we appreciate the Commission's intention set out in the Green Paper to undertake regulatory initiatives for the retail business only "if the economic case is made and if factors such as consumer confidence and cross-border activity can be improved". Regulatory measures for the retail business, however, which would only serve the purpose of creating an EU single market with products that have completely been brought in line are, as a matter of principle, not acceptable. consumer preferences and needs cannot be standardised The financial services offered by the banks are oriented towards the desires and needs of the customers in the market, which differ locally and on the basis of which the products are designed. Also in this context it is necessary to examine whether and in which areas the customers actually need simplified, standardised products. As mentioned in the Green Paper, it has to be assumed that private customers will rather opt for the local financial services offered than for cross-border financial services. J:\retail\Retail financial services\green_paper\consultation\ms\at_federal-economic-chamber_en.doc DVR

2 - 2 - In this context the aspect of "local provision of financial services", e.g. in structurally weaker regions, has to be pointed out. Especially here the variety of providers constitutes an important factor to ensure supply with financial services also by respective competition. Therefore, factors, such as confidence also in local providers, the personal relation of the customer with the customer advisor, local advice and the customer's wish for a longterm business relationship must be emphasised. Retail business is local business Therefore, planned initiatives should also bear in mind the principle of "retail business is local business". Accordingly, regulatory measures - if absolutely necessary - must be very cautious and targeted and take local diversities and particularities into account. Especially here it must be a concern not to throw functioning markets off balance by means of statutory provisions. II. Specific questions (1) Do you agree with the objectives and priorities set out in this Green Paper? We agree with the Commission's position to undertake additional regulatory initiatives in connection with retail financial services if the economic case is made and if a review results in clear concrete benefits for the consumer. An actual cost/benefit analysis for consumers and providers should have priority over any new regulation. We are of the opinion that the comprehensive initiatives require, however, sound judgment to be achieved and implemented in order to meet the requirements of the market and to live up to the expectations of all participants in the market, consumers and the industry. Furthermore, we point out that some objectives are inconsistent: for instance, competition should be increased and the market should be consolidated at the same time. (2) Are there issues that are not covered in this Green Paper, which are important for the integration of retail financial markets and which the Commission's attention should be drawn to? For example, are consumers in their everyday life confronted with requirements or limitations from either financial services providers or other stakeholders (employers, social security, administrations, businesses, etc.) which restrict their ability to use cross border financial services (such as an obligation to have a bank account or insurance policy in one specific country, etc.). The package of measures presented is sufficiently comprehensive. It has to be ensured that the envisaged harmonisation, i.e. approximation, will not end in mere standardisation, i.e. forced synchronisation. The single market would not benefit from such measures.

3 - 3 - The alternatives to statutory regulations have to be pointed out as well. Self-regulation also seems to be an appropriate alternative to binding legislation in any case. Moreover, we see an urgent need for a cost/benefit analysis for additional measures. This is in line with the statements of the Commission itself in the Green Paper where it reads: "Initiatives should only be pursued where there is evidence of clear and concrete benefits for citizens and a strong economic rationale. Policies must be based on solid economic evidence. In this connection we point out once more the high implementation costs. Such costs may ultimately lead to price increases of services and products. (3) The Commission has undertaken several initiatives to improve consultation with consumers and to secure their input into its policy making. Should further steps be taken and, if so, what steps? Studies involving consumers should be carried out to identify the actual needs of the consumers. Of course, all legislative bodies must clearly commit themselves to the principle of "better regulation". (4) Is consumer choice unnecessarily limited by restrictions on the providers and channels through which they access retail financial services What are, in your experience, these restrictions? No, since banks pursue a multi-channel approach, there are no restrictions. Already today consumers may receive all products via all distribution channels available. Also in this context it has to be pointed out that factors, such as language, tax regulations, culture and mentality may be relevant with respect to customer mobility (cross-country change of accounts). On the other hand, factors, such as confidence in a provider, i.e. the wish for a long-term business relationship, may be the cause why a customer does not even think about changing his bank relationship at all. It would be counterproductive to speak of an obstacle to mobility in this case and to intervene in order to cause alternative behaviour. We would like to remind you of the Muscat Report of the European Parliament, according to which the pluralistic structure of the European banking markets constitutes an asset of Europe's economy, which must not be questioned. The claim for equal terms of competition for all participants in the market based on the principle of proportionality should be maintained.

4 - 4 - (5) Despite efforts, in particular the creation of FIN-NET, the handling of crossborder consumer complaints in the field of financial services still remains problematic. The Commission would welcome input as to ways of improving the current situation. For example, should Member States be obliged to ensure that alternative dispute resolution (ADR) schemes are in place? Should providers be obliged to adhere to an ADR scheme? Should they be contractually obliged to offer ADR mechanisms to their clients? The existing FIN-NET system works efficiently and effectively and should be maintained. The Austrian banking industry established the Gemeinsame Schlichtungsstelle der österreichischen Kreditwirtschaft [Joint Conciliation Board of the Austrian Banking Industry] to settle certain complaints ( An independent and impartial ombudsperson who is not subject to instructions will decide on the cases. Customers of all participating banks may turn to the Conciliation Board. The Conciliation Board may be invoked in case of complaints against Austrian banks if the complaints are subject to certain EU regulations. Customer complaints will be dealt with quickly, based on a procedure that fulfils the requirements of the European Union. Accordingly, mandatory compliance with ADR schemes does not seem to be necessary. (6) The creation of the Single Euro Payments Area (SEPA) offers challenges and opportunities for businesses and consumers alike. What do stakeholders think of SEPA's impact on consumers? Should consumers be more involved in the governance and the preparation of SEPA? Involving additional levels would be excessive. In addition, it should be taken into consideration that the preparations for SEPA have already been finalised to a great extent and that only final implementation is still outstanding. If additional discussions were started in this connection this might lead to delays in the implementation of this important project. Concrete initiatives have already been started in the field of payment cards. By the future creation of a single European payment area (SEPA) cross-border payment transaction solutions for consumers will be offered and the implementation of uniform standards and infrastructures will enable efficient and cost-efficient handling for the benefit of the consumer. (7) With view to the launch of its study on credit intermediaries, later this year, the Commission would like to know whether stakeholders believe the current legislative framework to be sufficient and if consumers face any particular problems in dealing with credit intermediaries, particularly on a cross-border basis. It seems to be important that all providers in the market are subject to equal or equivalent rules. Thus, at least the information duty of the intermediaries should be adjusted to the high standards of the banks, i.e. equal guidelines for equal types of business.

5 - 5 - (8) The Commission believes that it has an important role to play in developing a competitive, open and effective market for long-term savings, retirement and pension schemes that meet consumers' needs. Do stakeholders agree and how could the Commission contribute? Could an optional legal EU-wide regime ("28th regime") for savings and/or 3rd pillar pension products be envisaged? We are sceptical about a 28 th regime because we see hardly any need of providers nor on the part of the customers. Expedient harmonisation would bring significantly more customer benefits than creating an "artificial" product. Especially banks engaged in cross-border business would be able to offer such products already now. However, it turns out that it is easier and more cost-efficient to adjust products to the relevant market situation in the new Member States than to create an "artificial product". Support, if any, could be envisaged on the basis of a case-by-case study to be able to evaluate both existing obstacles and possible advantages on a caseby-case basis. Thereby any potential of a 28 th regime could be determined. Simple products with, at most, slightly different tax treatment are suitable for such a test. However, we should bear in mind that the introduction of a complementary product under the 28 th regime in a national market could be quite problematic. (9) Do you think that there could be benefits for both banks and consumers, if banks would have the opportunity to offer an optional simplified standardised product, which would have a good level of consumer protection, would be easy to understand, and could be offered across borders without the need to be modified to fit local rules? No, because this conflicts with competition and there is a diversity of local needs. Cf. also the answer to question 8. In particular the variety of financial services ensures the customer's choice of options. Finally, we would like to point out that the complex nature of many financial products, which has obviously been recognised as a problem in the Green Paper, is due to the comprehensive requirements of the relevant European directives. (10) The Commission believes that more could be done to improve consumers' financial literacy and capability. Possible measures include developing guidelines or promoting best practices. The Commission would welcome input on how this policy should be further developed at the European level. The concept of improving consumers' financial literacy and capability is judged positively. This interest in better education and knowledge of consumers, which is, in principle, justified, is a concern of the public and the entire economy, which must be discussed and resolved in that context as well. It cannot be the direct task and duty of the banks to ensure promotion of general education.

6 - 6 - (11) Do you think that, as they stand, the provisions on consumer information contained in financial services directives are adequate and consistent with one another? Were it not the case, how could the Commission ensure that information requirements are set at the right level, ensuring proper information but without creating any overload? Do you think that informing consumers is sufficient or that advice should also be provided? If yes, should that be compulsory or on request? No, consumers are already overburdened with information and over-bureaucratisation should be avoided in any case. The various financial services directives partly pursue different political goals and have still not been harmonised. It is absolutely necessary to create broad coherence between the different information duties, which are partly contradictory. Advice should be an optional service which may be utilised by the customer. We object to the concept of compulsory advice. (12) Measures to improve lenders' access to credit data will be discussed in the context of the forthcoming White Paper on Mortgage Credit. The Commission believes that more could be done to promote the accessibility of credit data, in particular on a cross-border basis. Who should be able to access consumer credit data? How could the cross-border transferability of consumer credit data be improved, ensuring in particular that mobile credit data follows increasingly mobile consumers? Could a memorandum of understanding, ensuring smooth data circulation between credit bureaus, be a workable solution? no comment (13) Fragmentation of retail insurance markets, for example in the field of motor insurance, does not allow consumers to reap full benefits of EU integration in this area. Do you think that more should be done at EU level to address this fragmentation? no comment (14) Customer mobility and competition are closely associated. The Commission would welcome input as to how customer mobility could be enhanced. In particular, in the field of bank accounts, and as a follow-up to the Expert Group's work, would stakeholders see merits in, for example, having EU wide account switching arrangements? Will SEPA have an impact on customer mobility? We will comment separately on the Commission's document "European Commission releases Report of Expert Group on Customer Mobility in relation to Bank Accounts". As regards the assumption that customer mobility will increase competition and lead to lower prices we point out that competition does not only exist with respect to the lowest price. Other benchmarks, such as service quality, access, closeness, availability for the customer or image must also be taken into consideration.

7 - 7 - Transparency might be the most important criterion allowing customers to make the right choice based on their specific needs. Yours sincerely, Dr. Herbert Pichler Bank + Insurance Division