The European Commission's proposals to give citizens the right to open a bank account are admirable, according to the European Banking Federation’s Eric Leenders, but there needs to be a clear distinction between opening accounts for economic migrants and opening accounts for social inclusion. He tells EurActiv that bank accounts for social inclusion purposes should be left within the determination of the member states.
Eric Leenders is chairman of the consumers affairs committee at the European Banking Federation and executive director of retail at the British Bankers' Association.
He spoke to EurActiv’s Jeremy Fleming in Brussels.
Do you broadly favour the proposals by the Commission?
We see that there is value in harmonising standards to ensure that all EU consumers can expect the same standards of banking service, however we do not believe that it is necessary to ensure that there are uniform provisions for consumers to switch bank accounts cross-border.
We recognise that to support labour mobility it is important that consumers can open accounts cross- border. However we believe that the market already operates more effectively than it is being given credit for.
Equally, where the directive gives customers the opportunity to manage their financial affairs in different member states, we see this as entirely the right thing to do, but we think it would be very helpful if there was some form of economic or “purpose” test to help banks to understand what types of account activity they can expect in the accounts that they opens – for example if it was for work, study or retirement – and that would help to deter fraud.
We also think there should be clear distinction between opening accounts for economic migrants and opening accounts for social inclusion, which we think is very much for individual member states to consider given that these issues are the responsibility of individual member states. It would also be difficult to create a one-size-fits-all solution for switching bank accounts cross-border in that context.
We are in favour of increased transparency and helping consumers better understand charges and creating more standard terminology, but we find some of the level of proscription that the Commission has requested quite difficult. So for example that we understand that 80% of charges should be clearly identified and itemised and perhaps have a common definition but to qualify that further by saying that there must be list of at least 20 items that should be subject to the transparency proposals could cause problems in some member states and create a level of complexity and detail that and would be better left to member states to determine to reflect their different traditions.
What types of people are interested in switching bank accounts across borders within Europe?
Actually, we do not see very much demand for cross-border switching. The people looking for mobility to work, students and retirees, quite often like to keep their account at home as well because most of the time they have commitments in their home country. International banks can – and do - help people to open accounts across Europe. As a result we consider that it would be challenging and disproportionate, especially given the lack of demand - to provide cross-border switching because of the very complex infrastructure required within the banks,
Part of the purpose of the Commission’s proposal is to help increase the percentage of Europeans holding bank accounts, especially in those countries – such as Romania and Bulgaria – where the relative numbers who do not have accounts remain high. Will this work?
Primarily we see that as an issue for those member states to tackle, taking into account their own economic circumstances, it goes back to the fact that would be difficult to proscribe that banks should implement social inclusion requirements for particular member states, especially at cross-border level (as vulnerable people are only interested Iocal solution).
How much support in parliament is there for your arguments?
We are just beginning our round of discussions and there have been very sensible compromises put forward for consideration, such as making provisions for cross-border access to bank account where there is a genuine need or purpose, and we hope the legislators will accept some of our proportionality arguments, but the process is really ongoing.
How much chance do you believe that there is for the proposal to become law before the expiry of the term of this Parliament next year?
I believe it is better to get it right, than simply to get it done, and there might be some areas – such as the cross-border switching provisions – where it is better to defer consideration until the market has matured a little, to see if it would truly be of use to customers in a few years’ time, once the common standards in the rest of the directive have been truly embedded and established in the member states.