- It is essential to subject the Retail Investment Strategy (RIS) to a competitiveness check, urge European financial sector associations in their joint statement to co-legislators.
- The undersigned associations include the European Banking Federation (EBF), the European Fund and Asset Management Association (EFAMA), Insurance Europe and eight other European financial sector associations.
- According to the associations, the RIS as it currently stands does not support the European Commission’s objectives to boost the EU’s competitiveness, promote retail investment and simplify regulatory frameworks.
The EU Retail Investment Strategy (RIS) is one of the initiatives in the CMU action plan. Its aim is to improve retail participation in the capital market, increase the transparency of the costs of investment and enhance investor protection.
The European financial sector umbrella organisations issued a joint statement appealing to co-legislators for a critical re-evaluation of the negotiated proposals concerning the EU Retail Investment Strategy (RIS).
The associations welcome the new Commission’s aims to simplify regulatory frameworks but point out that these aims conflict with the reality of the RIS regulation.
“In its current form, the RIS will only add more complexity and bureaucracy, which will negatively impact both companies and investors”, comments Finance Finland’s Head of Investor Protection Terhi Valtonen.
RIS must be subjected to a competitiveness check
The associations urge co-legislators to conduct a careful impact assessment of the RIS proposals before taking the project to the next stage.
In their joint statement, the associations highlight the need to streamline regulation and reduce reporting and record-keeping requirements. As it currently stands, the RIS would increase regulatory burden and red tape for market participants.
Overly complex and overlapping rules will stifle retail investor engagement and increase companies’ operating costs. The joint statement points out that these costs are ultimately born by consumers.
“One of the major stumbling blocks of the RIS is related to sales processes. They should be streamlined to better serve the needs of customers”, Valtonen says.
“A complicated sales process may drive investors towards easily available high-risk products that are outside the scope of regulation and not supervised as financial sector products.”
Adequate investor protection is one of the prerequisites of a well-functioning market. However, the European financial sector associations regard the reporting obligations set by the RIS to be excessive and needlessly detailed. Excessive information can confuse retail investors and reduce the attractiveness of investment.
“Before the final negotiations, it is imperative to reflect on the fundamental aims of the RIS amendments and whether they serve the objectives of the Savings and Investment Union”, underlines Valtonen.
Valtonen reminds the Commission that current practices already function quite well.
“The Nordic market is running smoothly. The existing regulatory framework is adequate, and in Finland and Sweden, at least, retail investors are very active”, Valtonen says.
Finance Finland is a member in the European Banking Federation EBF, the European Fund and Asset Management Association EFAMA and Insurance Europe.
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