European financial regulators on Wednesday said that inconsistencies in the legislation for the securities, insurance and banking sectors are preventing regulators from ensuring adequate consumer protection.
In a joint letter to the European Commission, the heads of the three European Supervisory Authorities (ESAs) — the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA) — warn policymakers about the regulation of the cross-selling of financial products between different sectors.
Cross-selling has caused consumer harm in the past, undermined market confidence, and led to unprecedented compensation and litigation payouts and fines, the letter notes, resulting in a loss of confidence in the integrity of the financial system.
In addition, the letter argues that a consistent approach across the three financial sectors would be “beneficial for consumers, who do not always distinguish between the three sectors when buying financial products; to financial institutions, who would be subject to the same requirements irrespective of the products that are cross-sold; and to [regulators], who would have to supervise only one set of requirements …”
The letter calls on the European Commission to further evaluate the differences in the existing legislation, and to consider what’s needed to ensure that they can consistently regulate cross-selling practices across the three sectors. “We are writing today to urge you to address these issues as soon as possible,” the letter says.