How to enhance transparency of European banks in 10 words

Since november 1st, consumers have an online price list comparator updated by the Financial Sector Supervisory Commission (CSSF). This stage marks the culmination of numerous political, consultative and legislative approaches.

The objective was to agree on a standardized terminology between all the member banks of the European Union. A real challenge to “harmonize the vocabulary to an adequate level allowing consumers to understand and compare the fees and offers for payment accounts on a cross-border basis”, according to the delegated regulation of the European Union published in 2017.

It is therefore not unexpected to find the report of the study in the “consumer protection and financial innovation” section of the website of the European Banking Authority (EBA).

Back on two and a half years of policy development, testing with consumers and a three-month public consultation. How this innovation in the financial system serve the consumers?

From Europe to consumers of Luxembourg banks

Before this measure finally reaches the eyes of consumers, it is a real series of legislative episodes that took place:

  • First step: European Union Directive of 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features. This directive required European banks to provide a provisional list of the most common terms used in their customer relationship.
  • Second episode in september 2017 with the release of Delegated regulation of the European Union Commission supplementing the previous directive of the European Parliament and the Council. The latter adds clarifications as to the “regulatory technical standards for standardized terminology adopted at Union level”. It speaks indeed on “most representative services attached to a payment account” and not on products.

These rules of execution signed by the hand of Jean-Claude JUNCKER listed in each language the final list of terms.

  • Then for Luxembourg, the Law of june 13, 2017 on payment accounts, leads to the transposition of the European directive on the standardization of terminology.
  • Finally, these steps will culminate on june 6, 2018 with the signing by the Minister of Finance Pierre Gramegna, of the grand ducal regulation which definitively ratifies in Luxembourg law this famous list of 10 words.

The standard list of the most representative services attached to a payment account now in force is as follows: “Online banking, discovered, domiciliation, extract ofaccount, provision of a credit card, provision of a debit card, standing order, withdrawal of cash, account maintenance, transfer. “

The impact of this harmonization of vocabulary

The contributions of this measure are certain in terms of clarity and transparency towards consumers. However, one can easily imagine that it will also have a real impact on the banks of the Grand Duchy and Europe.

For consumers

The target and the true beneficiary of this European measure put forward by the commission is therefore the consumer: “This will allow consumers to compare offers from different payment service providers and make informed decisions about the payment account best suited to their needs.”

To give him the means to be actor, the CSSF (Financial Sector Supervisory Commission) has put online a price comparator. Announced in the Press release of October 25 this “Comparator website does not pursue any commercial purpose and has the purpose of making public transparently and objectively the rates charged by the payment service providers placed under the supervision of the CSSF for the most representative services related to the payment accounts “.

In a clear and synthetic table, one can compare for example accountancy fees between a Luxembourg bank, an international bank in Luxembourg and the Raiffeisen bank.

For banks

This norm has been welcomed by European banks as evidenced by the answer of the French bank Crédit Agricole during the consultation: “only this approach is likely to ensure a true comparability of bank charges at European level, by favoring generic terms rather than going into detail of the different types of products and services that can be offered by each institution. “

Indeed, this regulation is the result of a co-constructed approach. The EBA proceeded to “open public consultations …, analyzed the costs and benefits potentials … and sought the opinion of the Banking Stakeholder Group “. Near 46 banks and consumer associations responded to establish his report (including Austrian, French, German banks, UFC consumer associations and many others).

It should be noted that the institutions concerned by these new standards in Luxembourg are payment service providers that have at least 25 branches in Luxembourg or banks that have specifically requested the CSSF to publish their rates.

This measure is therefore perfectly in line with europe’s unique market-driven financial services market dynamics, which aims to bring more growth and increase the commercial opportunities of financial service providers, notably by raising the opacity of payment account fees  so that consumers are able to make informed choices.

As a result, Luxembourg banks will have to focus on measures to ensure their duty to inform and communicate with their consumers.

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