Response to consultation on Guidelines on product oversight and governance arrangements for retail banking products
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However, the manufacturer can only identify the target market on an abstract basis. The knowledge of the actual customer base is usually with the distributors. As a result, the final definition of the target market is up to the distributor and any involvement of the manufacturer can only be limited to a general perspective and a product assessment on an abstract basis, i.e. without taking into account any potential customer’s individual specifics.
The recently adopted Payments Accounts Directive, for example, aims at giving a broad range of consumers access to payment accounts and related basic services. For many of the products mentioned in these guidelines, a definition of a well-defined target market per product would thus not be necessary, as they represent basic banking products, which all consumers should receive access to. In these cases, a further customer classification would not lead to increased customer benefits – but may rather increase the complexity and/or limit the product offer for the consumer.
For more complex products, e.g. mortgages, in some cases it may make sense to define different target markets. In addition to offering standardised retail mortgages which we offer to the majority of our customers, we also offer more bespoke mortgage products for niche markets that are defined in our internal guidelines and are monitored more closely overtime.
That said, many of the mentioned products in these guidelines are not complex and have already been well-established in the market for a long time. In these cases, new developments are mainly focused on enhancements of product features and technical updates (such as the possibility to make free ATM withdrawals in non-EU countries). Hence, a wide range of scenarios assessing how the product would affect consumers might not be necessary to further reduce any risks for consumers. As mentioned previously, it is important requested for additional requirements should be proportional.
Any monitoring also needs to be clearly defined with regard to data protection obligations concerning customer data. The respective monitoring responsibilities should be clearly shared between both manufacturers and distributors.
Question 2: Do you agree with the delineation of the two sets of requirements for manufacturers and distributors?
Basically, we agree with the suggested delineation of requirements, although the responsibilities of the products manufacturer and distributor are linked. In case of a new product development or enhancement, both sides are involved and collaborate closely.However, the manufacturer can only identify the target market on an abstract basis. The knowledge of the actual customer base is usually with the distributors. As a result, the final definition of the target market is up to the distributor and any involvement of the manufacturer can only be limited to a general perspective and a product assessment on an abstract basis, i.e. without taking into account any potential customer’s individual specifics.
Question 3: Are there any additional requirements that you would suggest adding to either of the two sets of requirements? If so, why?
No further additions.Question 4: Do you agree with Guideline 1 on establishment, proportionality, review and documentation?
We agree, especially with Guideline 1.5 which states that governance arrangements should be proportionate to the level of complexity of the product. This is important to avoid disproportionate oversight and governance measures inadvertently leading to some products being unattractive. We disagree that the criteria of complexity of the product lines, distribution methods and distribution chains should be considered in this context. By definition they are very difficult to define and measure in conjunction with the nature of the manufacturer's business.Question 5: Do you agree with Guideline 2 on manufacturers’ internal control functions?
We agree with these guidelines. Our internal control functions are integrated into our internal product approval, control processes and systems (partially in the New Product Assessment process), and staff involved in product design are required to undertake training. In addition to these internal control functions, various external competent authorities/policy-making bodies, or consumer protection association findings are assessed as to whether additional measures need to be taken.Question 6: Do you agree with Guideline 3 on the target market?
In general, we agree with these guidelines. However, it is the distributors who are best placed to further specify the suggested target market according to the customer’s individual circumstances (e.g. their willingness to bear risks, their level of knowledge or of understanding, creditworthiness). A distinction should be made between simple/basic and more complex products.The recently adopted Payments Accounts Directive, for example, aims at giving a broad range of consumers access to payment accounts and related basic services. For many of the products mentioned in these guidelines, a definition of a well-defined target market per product would thus not be necessary, as they represent basic banking products, which all consumers should receive access to. In these cases, a further customer classification would not lead to increased customer benefits – but may rather increase the complexity and/or limit the product offer for the consumer.
For more complex products, e.g. mortgages, in some cases it may make sense to define different target markets. In addition to offering standardised retail mortgages which we offer to the majority of our customers, we also offer more bespoke mortgage products for niche markets that are defined in our internal guidelines and are monitored more closely overtime.
Question 7:Do you agree with Guideline 4 on product testing?
Before offering new products in our portfolio, we test the product testing (incl. respective documentation) is common practice. It is in our own economic interest to offer only products that are based on proper consumer demand and a comprehensive market and risk analysis. In some cases, product testing is done via scenario testing or piloting the products.That said, many of the mentioned products in these guidelines are not complex and have already been well-established in the market for a long time. In these cases, new developments are mainly focused on enhancements of product features and technical updates (such as the possibility to make free ATM withdrawals in non-EU countries). Hence, a wide range of scenarios assessing how the product would affect consumers might not be necessary to further reduce any risks for consumers. As mentioned previously, it is important requested for additional requirements should be proportional.
Question 8: Do you agree with Guideline 5 on product monitoring?
It is in the bank’s own interest and responsibility to perform continuous market research and monitor consumer behaviour. In addition we are required to assess whether new regulatory developments impact our product offering. Furthermore, external institutions like the Federal Statistical Office or the Bundesbank in Germany conduct and provide comprehensive market analysis, which helps us in assessing market developments and changing consumer behaviour patterns.Any monitoring also needs to be clearly defined with regard to data protection obligations concerning customer data. The respective monitoring responsibilities should be clearly shared between both manufacturers and distributors.