15 July 2015
The European Banking Authority (EBA) published today its final Guidelines on product oversight and governance (POG) arrangements for retail banking products. These Guidelines set out requirements for manufacturers and distributors when designing and bringing to market mortgages, personal loans, deposits, payment accounts, payment services and electronic money. The Guidelines are the EBA's response to increasing risks arising from the mis-conduct of financial institutions in their interaction with consumers and are part of the EBA's work to enhance consumer protection across the EU. The Guidelines will apply from 03 January 2017.
The mis-conduct of financial institutions can cause significant consumer detriment, undermine market confidence, threaten the integrity of the financial system, and incur large costs to wider society. According to a recent report of the European Systemic Risk Board (ESRB), banks have incurred aggregate costs of €200bn since 2009 as a result of fines, settlements and redress payments, €50bn of which by banks in the European Union.
In order to address some of these conduct risks, the EBA has developed detailed Guidelines on product oversight and governance arrangements for the retail banking products that fall into its consumer protection remit, which are: mortgages, personal loans, deposits, payment accounts, payment services, and electronic money.
The Guidelines provide a framework for robust and responsible product design and distribution by manufacturers and distributors. The first part of the Guidelines consists of requirements for manufacturers with regard to their internal control functions; the identification of the target market; product testing; disclosure; product monitoring, remedial actions, and distribution channels. The second part consists of requirements for distributors related to the distributor's governance; the identification and knowledge of the target market; and information requirements.
These Guidelines have been developed building on the initial work carried out by the Joint Committee of the three European Supervisory Authorities (ESAs) for the banking, investment and insurance sectors, which resulted in a ‘Joint Position' of the three ESA published in November 2013. Based on the Joint Position, the EBA carried out subsequent and more detailed work on product oversight and governance arrangements for the banking sector in 2014 and 2015. This resulted in draft EBA Guidelines which were subject to a three-month consultation period between November 2014 and February 2015.
Following the publication of the English version today, the EBA will make available, in due course, the translations of these Guidelines in all EU languages. Within two months from the publication of the translated Guidelines, competent authorities shall confirm to the EBA their compliance status, which will be disclosed on the EBA website.