On 24 May 2023, the Commission adopted a retail investment strategy that prioritizes the interests of consumers in the realm of retail investing. The objective is to empower retail investors, often referred to as "consumer" investors, to make investment choices that align with their specific needs and preferences. This approach ensures that these investors are treated fairly and receive adequate protection. Ultimately, this strategy seeks to cultivate trust and confidence among retail investors, enabling them to securely invest in their financial future while fully capitalizing on the EU's capital markets union.
As part of the Commission's capital markets union action plan for 2020, one of the three primary objectives was to enhance the EU's safety as an investment destination for long-term endeavors. Today's strategy endeavors to realize this objective, encouraging greater participation in EU capital markets, which has historically lagged behind other regions such as the United States, despite Europeans having notably high savings rates. Bolstering the capital markets union also serves as a vital mechanism for channeling private funding into the economy and supporting the transitions to green and digital technologies.
EU efforts to enhance retail financial services have yielded positive results, yet further steps are required to realize a fully unified European market in this sector.
In March 2017, the European Commission unveiled an action plan outlining a strategy to fortify the EU's single market for retail financial services. This action plan primarily aims to leverage the potential of digitalization and technological advancements, including FinTech, to enhance consumer access to financial services throughout the EU.
Digital services like mobile banking, peer-to-peer lending, and price comparison websites offer numerous opportunities for both service providers and consumers, potentially fostering greater integration of the single market for consumer financial services.
The EU Deposit guarantee schemes (DGS) are designed to provide reimbursement, up to a specified limit, to depositors in the event of their bank's insolvency. A foundational principle governing DGS is that they are fully financed by banks, with no reliance on taxpayer funds.
In accordance with European Union regulations, deposit guarantee schemes serve the following purposes:
1. Safeguard depositors' savings by assuring deposits of up to €100,000.
2. Mitigate the risk of a widespread deposit exodus in the event of a bank failure, which can trigger financial instability.
Over time, the EU has incrementally raised the level of deposit protection, starting with the initial DGS directive introduced in 1994.
Packaged retail investment and insurance products (PRIIPs) are integral to the retail investment market, offering consumers options for saving toward specific goals like buying a home or funding a child's education. The European PRIIPs market is substantial, with an estimated value of up to €10 trillion.
Despite their potential benefits, PRIIPs are frequently complex and lack transparency. The information provided by institutions selling these products can be convoluted, filled with technical jargon, and challenging to use when comparing different investment options. Moreover, because these institutions often serve as both sellers and advisors, conflicts of interest can arise, potentially leading to advice that may not align with the best interests of investors.
To address these issues, the EU has introduced a Regulation on PRIIPs, requiring producers and sellers of investment products to furnish investors with concise key information documents (KIDs). These KIDs are limited to a maximum of three pages and are designed to provide transparent information about investment products.
KIDs include details such as:
1. Product name and producer identification.
2. Targeted investor categories.
3. Risk and reward assessment, featuring a summary risk indicator, potential maximum capital loss, and relevant performance scenarios.
4. Information regarding the costs associated with investing in the product.
5. Guidance on how and to whom investors can file complaints in case of product or service issues.
The EU Mortgage Credit Directive represents a significant stride towards establishing a European-wide mortgage credit market characterized by robust consumer protection.
This directive is applicable to all loans extended to consumers for the purpose of purchasing residential property and encompasses the following key provisions:
1. Mandating lenders to furnish consumers with clear and comprehensive information regarding loan terms.
2. Requiring lenders to evaluate consumer creditworthiness based on standardized EU criteria.
3. Establishing uniform quality standards and ethical business conduct principles for all lenders operating within the EU.
4. Granting consumers the ability to repay credit ahead of the predetermined contract schedule.
5. Introducing an EU passport scheme that enables credit intermediaries authorized in any EU member state to offer services throughout the EU.
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