Wednesday 29 April 2015

Call for greater consumer protection initiatives to prevent misconduct in European banking

GLC's Principal Solicitor has called upon the European Banking Authority (EBA) to make greater use of its Article 9 consumer protection mandate to help prevent misconduct in banking across the European Union (EU).

In a presentation to the Board of Supervisors of EBA in London yesterday, Mike Dailly noted that EBA had and was undertaking good measures in relation to inappropriate sales incentives and financial stability, however, business misconduct had now become a systemic, macro-prudential risk.

The cost of misconduct from the world’s top 10 banks was £150bn (2008-12) including fines for mis-selling, LIBOR and EURIBOR manipulation, breach of money laundering rules, and non-regulatory compliance. Mis-selling through inappropriate sales incentives schemes was at the heart of the problem and was an ongoing issue.

For example UK mis-sold payment protection insurance compensation payments were over £28bn and rising; in Spain compensation for mis-sold hybrid securities was at 2.9bn; in the Netherlands compensation for customers of the failed DSB Bank totalled 215m; the cost of the bail out of Banco Espirito Santo  in Portugal was 2.1bn; while Deutsche Bank AG was fined £227m last week by the UK's FCA for LIBOR and EURIBOR manipulation and repeatedly misleading the regulator's investigation.

GLC's Mike Dailly suggested a range of initiatives including greater legal accountability of banking executives; a binding ethical code of practice as part of a drive towards professionalism; more meaningful and targeted disclosure to empower consumers and minimise financial detriment; EU market studies on access, quality and pricing of personal current accounts, and analysis of cross-border barriers to banking; all backed up with appropriate legal guidelines and recommendations under Article 9 of Regulation (EU) No. 1093/2010.

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