New rules for banking delayed

Date: 11/04/1996

YIELDING to pressure from big banks, the European Commission looks set to rule out new laws for the financial sector until a detailed study of cross-border banking trade has been completed.

Abandoning plans for new rules on the sale of financial services from a distance, the Commission is now expected to launch a wide-ranging consultation process by the end of April, asking consumers and banks what problems, if any, they have encountered when buying and selling banking services abroad.

On the basis of the replies, the Commission will then decide whether or not to propose new laws.

The move comes amid fears that an excess of rules and regulations would further hamper the development of a single market in financial services which has proved slow in getting off the ground.

The Commission's softly softly approach will come as a relief to bankers who claim they are already staggering under the weight of single currency plans.

“We need to be left in peace until after the change-over to the single currency. We are already totally overloaded,” says Gaël du Bouëtiez, of the European Savings Bank Group.

But the proposed plan of action, outlined in a communication due to be sent to the European Parliament, is likely to provoke furious responses from MEPs and consumer representatives.

“What this means is that consumers will be more protected when they buy a pair of shoes abroad than when they buy expensive and complicated financial services,” says Jim Murray of the European consumer organisation BEUC.

He claims that the legal vacuum will, in fact, hinder rather than help the development of the single market.

“What they really need to do is build consumer confidence in foreign banks and building societies. By failing to pass the appropriate laws, the EU will simply encourage Europeans to buy their financial services at home.”

Consumer Affairs Commissioner Emma Bonino only just managed to persuade the Parliament last December not to include financial services in the scope of a draft directive governing distance selling of goods and services in general.

Bonino, arguing that mortgages should not be treated in the same way as, for example, keep-fit equipment, promised she would consider proposing a separate directive for the financial sector.

Her decision to hold off for the time being is likely to be viewed by parliamentarians as a breach of that promise.

Although Bonino's officials were said to have been in favour of legislation to beef up consumer protection in this area, DGXV, the Directorate-General for the internal market and responsible for co-drafting the Commission's position on this matter, firmly opposed any action. Sources say that after lengthy negotiations, DGXV's deregulatory pro-business approach has won through.