Message from the CEO, Nina Schindler
Towards the end of its legislative term 2019-2024, in Spring 2023, the Commission issued an extensive series of legislative proposals i.e. a Regulation on a Framework for Open Data Access (FIDA), a Payment Services Regulation and a revised Payment Services Directive, a Regulation on the establishment of the Digital Euro, and a series of legislative proposals regarding retail investments generally referred to as the Retail Investment Strategy.
Cooperative and retail banks, as key financiers of regions and households, while appreciative of the reflection that went into all these proposals, were quite taken aback by the scale and intensity of their content as they address virtually all aspects of the retail banking business that they specialise in.
In reaction, EACB members decided to initiate a reflection on the combined impact of these proposals on the retail banking sector by establishing a dedicated Taskforce on the Future of Retail Banking. Leveraging the expertise and complementing perspectives of technical leaders across the Europe's cooperative banks, the Taskforce contemplated the bigger picture of retail banking in Europe, including its defining features, its societal and economic significance, and its response to prevailing regulatory frameworks. The goal is to ensure that the European economy and society can continue to harness the advantages offered by this sector in the future.
In this edition of the EACB monthly newsletter, we asked Alexandra Jour-Schroeder, Deputy Director General of DG FISMA, to reflect on the last 5 years and the string of legislative proposals put forward end of last year and the Chair of the EACB Taskforce, Alban Aucoin, Head of Public Affairs of Crédit Agricole group, for his takeaways on its impact on the retail and cooperative banking landscape.
3 Questions to Alexandra Jour-Schroeder, Deputy Director-General, DG FISMA, European Commission
Ms Alexandra Jour-Schroeder is Deputy Director General of the European Commission's Directorate-General for Financial Stability, Financial Services and Capital Markets Union since March 2021. She started working for the European Commission 25 years ago, inter alia for the Commissioners responsible for regional policy, justice and industry. Since 2017, she has been Director for Criminal Justice in the Directorate-General for Justice and Consumers and from 2018 to 2021 acting Deputy Director General.
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- With the European Elections drawing near, reflecting on the 2019-2024 European Commission mandate, what would you see as DG FISMA’s most significant achievements?
The Commission has made considerable achievements in the financial services sector over the past five years. And these achievements have been pivotal in an increasingly challenging economic and geopolitical environment. I will highlight just a few of the main areas where significant progress has been made:
Our Digital Finance Strategy, which is designed to foster innovation, competition, and consumer protection in the digital financial services sector. For example, the Digital Operational Resilience Act (DORA) will significantly strengthen the IT security of financial entities, including services of critical third-party services.
Our Sustainable Finance Agenda, which aims at aligning the financial system with sustainability goals. By incentivising capital to flow towards sustainable projects, we have taken very concrete steps to fulfil the EU's commitment to combat climate change and promote sustainable development. We are determined to support market operators in their journey to make full use of the framework.
We have changed the gear to address money laundering, in particular with the creation of the new EU Anti money Laundering Authority. AMLA will not only directly supervise those financial sector entities exposed to the highest risk of money laundering and terrorism financing but also enhance cooperation among Financial Intelligence Units.
In the payments area the new Regulation on Instant Credit Transfers with its significant acceleration of the payment process is a major achievement to benefit consumers and businesses across the EU.
We have also made progress on our ambitious agenda to deepen capital markets integration through the Capital Markets Union Action Plan with its many individual initiatives while there is more to do to create truly integrated European Capital Markets.
- Looking ahead, are there any insights gained from the past 5 years that you would look to carry forward to the upcoming Commission?
Let me share three insights with you.
The first is that the rules in books are only as good as the rules in operation. This means that we should focus appropriately on implementation and application of the recently adopted legal frameworks. We are also mindful to simplifying the financial market regulation framework as long as this does not endanger our strategic objectives of financial stability and investor protection. At the same time, we stay committed to our goal of achieving an integrated, open and efficient financial system that contributes to our growth agenda.
In the last Commission we dealt with the largest global pandemic this century, as well as the worst energy crisis in recent history. We do not know what awaits us in the next five years. Thus, my second point is that we need to stand ready to respond quickly and with determination to new challenges as they become apparent.
The third insight is that we need to be ahead of the curve in addressing new trends in support of our society. How can we best address for example the increasing use of artificial intelligence (AI) in finance. AI offers companies the chance to increase efficiency, improve decision-making, and enhance their customer experience, but AI also raises many issues, such as data quality, bias, and lack of transparency. So, we must work on smart solutions – together with our stakeholders.
- EACB members have looked upon the string of legislative packages released last year (Open Finance Package, Retail Investment Strategy, Digital euro) with a critical eye. Combined with other initiatives such as DG Connect’s Digital Identity framework, they seem to signal a trend for financial services legislation to become ever more expansive and detailed with a significant impact on the cooperative and retail banking model. What would be your view on that?
It's true that we have been busy! But it is our responsibility to ensure that the EU’s financial sector is fit for purpose, and, as I have already said, we need to adapt to the digital transformation that is already occurring in finance. This is why we proposed our Open Finance Package. We know that to make the digital transformation work for consumers we need a new framework for secure and open access to customer data across a wider range of financial services. And, yes, this is more expansive since it builds on what we have already achieved with Open Banking. But this is, in part, due to the fact that new providers have entered the payment services market, enabled by these same digital technologies. If we don’t respond to this development, then there is a risk that we would be failing in our duty to your customers.
A similar logic applies to our Retail Investment Strategy, which aims to empower retail investors to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected. I am convinced that building trust and confidence among consumers will result in tremendous opportunities for retail and cooperative banks, as well as for other financial institutions.
And, lastly, a digital euro seems like the logical next step forward for our single currency. It has the potential to help strengthen the monetary sovereignty of the euro area, foster competition in the European payments sector and improve lives of consumers. We will continue to engage with stakeholders, market participants and the public to ensure that any potential digital euro is capable of meeting the needs of all users.
Second Opinion from Alban Aucoin? Head of Public Affairs, Crédit Agricole group
Mr Alban Aucoin, is Head of Public Affairs of Crédit Agricole group. He is member the Board and General Assembly of the EACB, and Chair of the EBF retail committee. After a career in public administrations in Paris and Brussels, he joined the Crédit Agricole group in 2010.
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Strong universal retail banks such as cooperative banks are a vital part of Europe’s financial sector. They support local economies, promote financial inclusion, and contribute to both sustainable development and a stable banking system. Their deep-rooted presence and commitment to serving diverse customer needs are essential for Europe’s strategic objectives. It is key to understand and consider the strong positive contribution of both Europe’s universal retail and cooperative banks toward achieving the EU’s economic and social objectives. It should be ensured that the diversity they bring can be maintained.
The universal retail banking model is a diversified product and service offering through a single point of contact accessible to a wide range of customers, including regional and local businesses. Combined with a proportionally dense branch network, cooperative governance and anti-cyclical behaviour, this makes a positive contribution to the strength of regional and local economies. As result, universal retail banks and cooperative banks are key players in financing the real economy and supporting the green and digital transitions. The diversification of products and services also ensures financial inclusion based on the principle of solidarity and allows them to offer affordable financial services to all citizens.
The avalanche of legislative proposals concerning retail banking in spring 2023 have sent a shockwave through the community of cooperative and retail banks. The combined impact of the proposed measures leaves virtually no area of retail banking untouched.
Proposals like the Retail Investment Strategy, Digital Euro, Financial Data Access (FIDA) and Payment Service Regulation (PSR) tend to intervene deeply into the commercial freedom of universal retail banks. These interventions hinder the ability to offer services at fair prices and shift universal retail banks into an enabling role, thereby weakening their capacity to compete. Instead of positioning retail banks as utility providers, it is crucial to enable them to build a sustainable business case.
These recent proposals limit universal retail banks’ ability to pool costs and cross-subsidise across different client profiles and services. Meanwhile, it allows market players with different business models to prioritise the least costly and most profitable customer segments, potentially leaving others underserved.
We fully support the political objectives of the Commission. However, the current regulatory path to achieving these goals contains initiatives with the potential to indirectly undermine the EU’s stated objectives and the universal retail and cooperative banking sectors of Europe.
These proposals may unintentionally disadvantage existing European actors, while non-European players with economies of scale stand to benefit. Their impact on the universal retail and cooperative banking model will translate into impacts on the European economy as a whole.
It is essential to consistently assess legislative proposals on their impact on the diversity of the banking landscape and related effects for the financing of Europe’s regions and households. It is crucial to impose comparable obligations on other non-bank financial service providers. These obligations should cover aspects such as inclusion, cash access, paper-based services and branch availability.
The EACB supports the further integration of competitiveness checks during impact assessments for legislative proposals. These checks should span various contexts and evaluate factors such as cost, price, international competitiveness, innovation capacity, SME impact, and other social values. Furthermore, the application of competitiveness checks should extend across all European institutions, including supervisors and the European Central Bank. Ensuring representation of the business community in the competitiveness check assessments is crucial to avoid complacency assessments.