|
|
|
BIPAR UPDATE - Issue no 1, January 2008Editor:BIPAR Secretariat In this update
Proposed Directive on VAT rules for financial and insurance servicesOn 28 November 2007, the Commission adopted a proposal for a Directive aimed at modernising and simplifying VAT rules for financial and insurance services and securing a level playing field in the pan- EU market. These services are generally exempt from VAT but the exemption dates from 1977 and the legislation has not kept abreast of developments since then.The proposal aims to create more certainty and security for Member States and for financial and insurance institutions. The Commission intends to achieve these objectives by three measures contained in the proposal:
Definition of exempt insurance and financial intermediation services The proposed new definition of exempt insurance and financial intermediation services reads as follows: Intermediation in insurance and financial transactions means the supply of services rendered to and remunerated by, a contractual party as a distinct act of mediation in relation to the insurance or financial transactions referred to in points (a) to (e) of article 135(1), by a third party intermediary. Points "a" to "e" of article 135 (1) refer to the following services: a) Insurance and reinsurance. b) Granting of credit and guaranteeing of debts resulting from the granting of credit. c) Transactions concerning financial deposits and account operation. d) Exchange of currency and provisions of cash. e) Supply of securities. Next Steps Over the last 18 months the BIPAR VAT Working Party has been very active in ensuring that the current formal proposal reflects as much as possible the needs and requests of our sector in terms of exemption. In the coming months, we will continue to work at European Council and European Parliament level in order to fine tune and clarify the text. In this regard, a meeting is already planned with DG TAXUD in January 2008. For more information, please contact your national association. BIPAR paper on Solvency IIOn 10 July 2007, the European Commission adopted a proposal for a directive reforming prudential regulation of the insurance industry, providing a safety net for policyholders and supporting market stability.Solvency II is considered by policy makers and politicians at national and European level as the most important regulatory project in financial services for the coming 3 years. This directive does not only change solvency rules for insurers but also recasts 13 directives in the insurance sector. Because of the potential impact of this project on the insurance market, BIPAR has decided to establish a "Solvency II" working party under the aegis of BIPAR EU Committee. The mission of this working party is to inform BIPAR and its national associations about the proceedings and to identify and discuss possible consequences for intermediaries. Where necessary the working party will also develop recommendations for BIPAR in terms of positioning. As a starting point BIPAR has developed a general guidance paper describing the basics of Solvency II and giving first indications of possible impact on the intermediation market. This paper is available at your national association's Secretariat. The Solvency II framework proposal is now being studied by the European Parliament and Council. During the first exchange of views clarification on a range of issues was requested. The Solvency II project follows the Lamfalussy structure: the Level 1 Proposal for a Directive sets out the key principles of the new system; following the adoption of the Level 1 Directive, detailed implementing measures will then be introduced at Level 2. In order to help prepare level 2 implementing measures, the Commission's services have asked the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) to run a fourth Quantitative Impact Study (QIS4) between April and July 2008. The European Commission is organising a Public Hearing on 28 January 2008 to give all stakeholders the opportunity to express their views on the Solvency II project and the draft QIS4 specifications. The Public Hearing will cover the following topics: insurance groups, proportionality and SMEs, and the use of internal models. Members of the BIPAR Working Party on Solvency II will participate in this public hearing. Guarantee schemesFor some months the European Commission has been examining with the Member States and the industry the possible elements and areas of harmonisation of insurance guarantee schemes (IGS) for policyholders through a binding EU instrument. Insurance guarantee schemes provide last-resort protection to policyholders and beneficiaries when insurers are unable to fulfill their contract commitments, offering protection against the risk that claims will not be met in cases of failure of an insurance undertaking. Before deciding whether or not to come forward with a formal proposal, the European Commission decided to outsource a feasibility study to an external consultant.On 7 January 2008 this consultant (the UK Oxera Consulting Ltd) submitted its report which provides a comparative analysis of existing IGS in the different EU countries and presents an evaluation of the options available, i.e. to preserve the status quo (it is left up to MS to decide whether to introduce an IGS, with no harmonisation across the EU) or to introduce an EU-wide approach to IGS (this includes options that differ in the degree of harmonisation and the aspects to be harmonised as well as in the structure of the national IGS adopted). The evaluation of these options is carried out against a set of criteria including consumer protection, market confidence and stability, incentives, competition, fairness, proportionality and feasibility. According to the report no single option meets all these criteria and the ultimate choice depends on trade-offs between policy objectives and to the weight given to the different and often conflicting, criteria. In the European Union 13 Member States operate one or more IGS. Latvia, Malta, Romania, Spain and the UK have general schemes that cover both life assurance and non-life insurance. France, Germany and Poland have a general scheme for life assurance, and Denmark, France and Ireland have a general scheme for non-life insurance. Belgium, Finland, Germany, Italy, Poland and Spain have special schemes that cover specific classes of nonlife insurance. IGS are notably different from one EU country to another. According to Oxera, the decision concerning whether to implement harmonised IGS across Member States, and where to set the minimum protection standards, depends on preferences at overall EU level and the weight of preferences between individual countries. As such, it is a matter of policy. BIPAR, which is, under certain conditions, in favour of harmonisation of the rules for insurance guarantee schemes in a European Directive in order to enhance the protection of consumers, will carefully monitor the next steps that will be announced by the Commission in the near future. Directive on credit agreements for consumers - BIPAR successful EP lobbying re credit intermediariesOn 16 January 2008 the EP Internal Market and Consumer Protection Committee (IMCO) voted its second reading report on the proposed Directive on credit agreements for consumers. The aim of the proposed Directive is to promote the development of a Single Market for consumer credit and should thus apply to all providers of unsecured credit to consumers (such as banks and building societies) and all credit intermediaries.The Directive on Consumer Credit aims to give consumers standard, comparable information on advertising, pre-contractual information, annual percentage rate of charge, ... The Directive also sets out two essential rights for consumers: - once they have concluded a credit contract, consumers will be able to withdraw from the credit without having to give any reason, and without any charge. - the Consumer Credit Directive confirms the right to repay early at any time. Standards are set on the compensation creditors are entitled to claim in case of an early repayment, in order to lower market entry barriers. Further to BIPAR Life and Investment Committee's lobbying of the EP Committee (in close and efficient cooperation with its concerned member associations and, in particular, AIFA), the report voted on 16 January contains an amended Article 21 re the obligation of credit intermediaries. Credit intermediaries incur a number of fixed costs in providing advice, which they recover from either the client or lender or a combination of the two. Section b (ii) of Article 21 of the proposed Directive prohibited credit intermediaries from receiving a fee from their client if they had received commission from the lender or vice versa. The EP report deletes this section b (ii) and introduces instead a requirement for fee to be disclosed to the consumers; it ensures therefore (in return) the advisers and their clients the freedom of choice and flexibility. Section b (iii) of the old Article 21 prohibited intermediaries from charging a fee for their service if the credit agreement with the consumer is not concluded. For BIPAR, professional advice comes at a cost and advisers should be able to charge for it regardless of whether a recommendation is followed through or not. Any remuneration or compensation for services of an adviser should be considered as an issue between the parties. The EP report deletes this prohibition and states that fees have to be agreed between the consumer and the credit intermediary on paper or another durable medium before the conclusion of the credit agreement. Article 21 was amended at a very late stage in the Council's Common Position and BIPAR was concerned that it may have a negative impact on EU consumers of both unsecured and secured credit in some markets because of the way that some credit law is structured and the potential for later read across into mortgage regulation. The Directive on Consumer Credit will soon be formally adopted and will have to be implemented early 2010. Commission's Communication on financial educationThe European Commission adopted on 18 December a Communication on Financial Education. This Communication is one element in the package of measures on retail financial services set out in the Commission's report on a "Single Market for 21st Century Europe", whose aim is to improve the delivery of benefits of financial market integration to Europe's citizens.Principles on financial education The Communication sets out some basic principles to guide providers of financial education, based on existing best practices. These principles are the following:
Priority initiatives While the Commission considers that the primary responsibility for financial education remains with Member States, non-profit agencies and financial service providers, the EU can be instrumental in providing practical assistance. In this regard, the Commission has identified the following initiatives as a matter of priority:
The Commission will monitor progress of the various initiatives outlined in the Communication. In addition, these initiatives will be subject to a comprehensive review in 2010. BIPAR will consider its possible role in financial education with its national associations. National associations that have initiatives in this field are kindly invited to inform BIPAR. Review of the Doorstep Selling Directive - BIPAR position on the possible modification of the exemption for insurance contractsThe Directive on the protection of consumers (1985) in respect of contracts negotiated away from business premises (the Doorstep Selling Directive) excludes insurance contracts from its scope. However, in its consultation document issued mid November to take stock of the effectiveness of the Directive, the Commission stated that in the context of the implementation of the EU text, Member States have made extensive use of the minimum clause to raise the level of consumer protection and the exemption concerning insurance contracts, for example, has not been implemented by all of them (although it has proved more popular than other exemptions). The Commission is therefore wondering whether the exemptions need to be modified in the light of the new market developments and asked the views of stakeholders on the issue, amongst others.On 4th December 2007, based on its member associations' comments, BIPAR submitted its response to the Commission focusing on the possible modification of the exemption for insurance contracts. BIPAR believes that before deciding upon the application or not of rules from generic doorstep selling regulation to the insurance activities, an analysis should be made of the need, the potential unwanted side-effects and the costbenefits taking into consideration the specificities of the insurance and insurance intermediation activities. At this stage BIPAR is opposed to the introduction of insurance contracts within the scope of a revised generic doorstep selling directive. Consumers' protection is highly ensured by the Insurance Directives and the Insurance Mediation Directive (IMD) applicable regardless of the way in which the contract is sold. Submitting insurance intermediaries to other requirements on information provision could create confusion and legal uncertainty for consumers. Moreover, this protection is reinforced by the provisions of the Directive on distance marketing of financial services. A modification of the exemption re insurance contract could therefore, without further specific study, duplicate the "acquis communautaire" in this field and could potentially produce effects contrary to the aims of greater consumer protection. In any case, it is always more appropriate to treat insurance separately given its complexity and specific nature. Commission's call for evidence on substitute retail financial productsSubstitute Retail Financial Products can be defined as those products which, in spite of presenting different characteristics, satisfy the same financial needs from an investor's perspective. Although competition between products brings positive development as it broadens the range of options available to consumers and investors, the European Commission has raised its concerns in respect to substitute retail financial products which fall under the scope of different legislative regimes. The European Commission believes that this can mean a risk to the investor, due to the different levels of product disclosure, potential conflicts of interest, or intermediary regulation embodied in EU financial services legislation. The European Commission has launched a consultation in order to view stakeholders' opinion regarding 1) Product disclosure, 2) Conflict of interest management by product originators and intermediaries, 3) Point of sales rules to be respected by intermediaries to limit the sale of "unsuitable products" and 4) Rules on advertising/marketing.BIPAR is currently consulting its member associations on a draft response that will be submitted to the Commission by 18th January. This draft response deals with subjects such as why concerns of investor detriment in relation to substitute products are emerging, different regulation regimes leading to investors' detriment, and the possible need for action to address risks arising from uneven product disclosures. White Paper on mortgage credit: no new regulation yetOn 18 December 2007 the European Commission published a White Paper on the integration of EU mortgage markets. The White Paper evidences obstacles such as language, distance, tradition, consumer preferences or lender business strategies which restrict the level of cross-border activities, reducing full competition in the Single Market for residential mortgages. In this context, the European Commission suggested to facilitate the cross-border supply and funding of mortgage credit as well as to increase the diversity of products available, to empower consumers, and to enhance consumers' mobility.Although the White Paper presents some nonlegislative solutions concerning land registration, property valuation, and forced sales procedures, the Commission believes it is better to wait for a legislative solution. This having been said, the Commission affirms that legislative solutions will be adopted in the future, if necessary, and will be accompanied by their respective impact assessments and consultation procedures. Collective redress mechanismsThe Portuguese Presidency organised, with the support of the European Commission, a conference on collective redress in Lisbon on 9 and 10 November 2007. One of the central questions of the conference was related to whether an EU initiative in the area of collective redress is necessary.The development of collective redress mechanisms at EU level for breach of EU law may have important consequences for the insurance sector in Europe. Currently, if an insurance intermediary who carries out cross-border business infringes EU law, consumers not established in the same Member State of the intermediary cannot join a collective redress mechanism in the Member State of the intermediary. The Commission intends to remediate this situation. One of the proposals is to create a collective redress mechanism at EU level. Meglena Kuneva, Commissioner for Consumer Protection, spoke during the conference and examined the question of collective redress. She stressed that any future action of the Commission in the area of collective redress would not necessarily mean a fully legislative initiative. There are other options such as the establishment of an out-of-court collective redress scheme or an extension of Member States' collective redress schemes to consumers from other Member States. Most of these options could be implemented either by binding EU law or a non-binding policy recommendation. Kuneva also underlined the benchmarks that effective and efficient redress systems should respect in order to ensure satisfactory redress for consumers. Some of the benchmarks mentioned were the following:
BIPAR next meetings
|