ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

Erhvervs-, Vækst- og Eksportudvalget 2015-16
ERU Alm.del Bilag 227
Offentligt

Answers by the Danish government to the specific questons raised by the Commission.

1.Better products, more choice and greater opportunities for consumers and businesses

For which financial products could improved cross-border supply increase competition on

national markets in terms of better choice and price?

We recognises and concurs with the fact that retail financial services continue to be primarily based

on national markets with variations subject to the service and products in question and that

consumers currently tend to remain with their providers of financial services. The main reason for

this is the lack of engagement by consumers in financial matters despite such matters having (large)

impact on their personal economy and the increasing complexity of finanical products.

Therefore fairly simple and comparable financial products and services would be those most likely

to be further marketed and understood on a cross-border basis. Possible examples are payment

accounts and payment services. However, it must be noted that both products are covered by newly

adopted financial legislation – the payment services directive (PSD II) and the payment account

directive (PAD) and it would be advisable to await evidence of the impact thereof. The issue of

increasing engagement is multifacetted and is further discussed in the answers to questions in

section 1.1. Futhermore it needs to be regonized that some financial markets are national in nature,

and therefore the product are not suitable for cross-border selling.

With regard to the premises underpinning the extent of cross-border activity in the area of insurance

in the Green Paper we would propose that the Commisison further assesses the area to include not

only the extent of cross-border trade of insurances but also e.g. the activity of insurances through

branches in the member states.

While acknowledging the ambition of increased activity and competition cross-border, the

challenges in creating increased consumer activity on national and domestic markets, makes it

equally important to focus on engaging consumers in financiel matters in general.

What are the barriers which prevent firms from directly providing financial services cross-

border and consumers from directly purchasing products cross-border?

From the consumers point of view there is a range of elements that may influence a decision to

engage in cross-border purchase(s). Some are listed below:



Complexity as addressed above in question 1.



Language barrier. While certain cross-border providers may present information in English,

even if only in exerpts, it carries the underlying assumption that any consumer in another

country is sufficiently proficient in English to understand the material. This obstacle could be

addressed by making information available in English and/or one or more of the language(s)

accepted by that member state.

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren



Differences in tax regimes as well as other national legislation often also present challenges for

consumers as they are not able to assess their rights and obligations when conducting a

purchase.



Unjustified differences in fees or exchange rates can be dissuasive.



Risk of cyber crime may dissuade certain consumers from making purchases cross-border by

use of digital means. The other side of this is cyber security for the provider which contributes

to furthering trust and incentive for use.

From the providers point of view cross-border activity whether through establishment of physical or

online presence requires (extensive) analysis and the presence of a market for the products and

services. Particularly physical establishment requires a certain market of scale to be profitable.

Can any of these barriers be overcome in the future by digitalisation and innovation in the

FinTech sector?

It is feasible that certain aspects may be mitigated through means of digitalisation and the creation

of new products and services or new (and more secure) ways of acquiring the products, but it should

not be seen as the sole means for overcoming all barriers.

What can be done to ensure that digitalisation of financial services does not result in

increased financial exclusion, in particular of those digitally illiterate?

We recognise that increased (successful) digitalisation of financial services and products will also

be dependant on the user’s capability to use the technology. Compentencies can partially be

supported by developing intuitive systems, bearing in mind the general digital knowledge of the

average consumer, as well as adequate information conveying how to use the new facilities by the

providers even if they are based solely on-line, by way of e.g. help-lines and personal contact. It

would be in the interest of the financial services provider to contribute to the customer’s ability to

access and use the systems.

However, while digital illiteracy could materialise as an increasing risk in this regard it will be

equally important to ensure and increase the consumer’s understanding of the financial products and

services.

What should be our approach if the opportunities presented by the growth and spread of

digital technologies give rise to new consumer protection risks?

Regulation is almost inherently reactive while digitalisation continuously evolves and is forward

looking and innovative by nature. Given the speed by which digitalisation progresses it will be

important to pay due attention to the need for all initiatives to take into account, in full and as

necessary, the differences between the physical or traditional paper world and the digital world.

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

Priority should be and is being given to adapting to these challenges and recognising that financial

services based entirely on e.g. online presence may present different risks than the more traditional

manner of providing financial services, such risks should be identified and clarified as well as set

out more explicitly than the case may be today. Considering the on-going work in relation to the

Digital Single Market consideration should be given to recent developments and the effects thereof.

In this respect we would like to stress the importance of EBA defining regulatory technical

standards within the provisions of PSDII that will not compromise the built-in confidentiality of the

user’s security credentials between the user and the IdP or trust service provider, as this built-in

confidentiality is a prerequisite for having a single solution for banks and public authorities, as is

the case in Denmark. Denmark has provided a position regarding this for the EBA/DP/2015/03

discussion paper.

Do customers have access to safe, simple and understandable financial products throughout

the European Union?

Generally, we believe that consumers do have access to financial products that meets their needs.

However, it continues to be a challenge to ensure understandability (and simplicity) given the

increased complexity in financial products. Therefore, consideration may be given to the view that

not all finanical products are suited for retail consumers.

Another element to take account of is the legislative and cultural traditions in a Member State that

may influence the manner in which a consumer finds something simple and/or understandable. All

financial products may therefore not necessarily easily be transferred from one jurisdiction to

another.

Means to ensure these goals can be acheived through regulation and can be identified in several

areas of current legislation such as product validation or intervention rules, conduct of business

rules, etc. Finally, it is complemented by the actions and reactions of the public. Considering the

recent large adaptation and new initiatives in these areas due consideration should be given to the

effects thereof, before implementing further initiatives.

Is the quality of enforcement of EU retail financial services legislation across the EU a

problem for consumer trust and market integration?

The quality of enforcement of retail financial services legislation across the EU does not currently

pose a problem for consumer trust and market integration, but it is important to underline that the

proper functioning and further succes of cross-border activity relies heavily on the ability to enforce

financial services legislation across the EU as well as the orderly conduct of financial service

providers.

There have been examples of financial products being mis-sold by providers in other member states

by the use of the European passport without the home country taking appropriate action. In relation

to enforcement it is imperative that the rights and obligations of both consumers and the financial

services providers are clear and actors engage on a level playing field. Furthermore, while correct

and effective cross-border supervision can enhance consumer confidence in the internal market,

lack thereof can do the opposite. The national competent authorities, whether being a host or home

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

competent authority, should seek cooperation during enforcement procedures, where relevant. Such

cooperation can be furthered and developed through the relevant European Supervisory Authority.

8. Is there other evidence to be considered or are there other developments that need to be

taken into account in relation to cross-border competition and choice in retail financial

services?

In recent years a considerable amount of consumer related directives have been adopted at EU level

that significantly enhance consumer protection on financial products within the European Union.

For the most part the regulation includes provisions aiming to enhancing transparency and compa-

rability of financial products and constitute important milestones. The Danish Government strongly

encourages the Commission to carefully take into account the effects of such legislation as well as

other on-going initiatives prior to proposing further legislation. It might be supplemented by nation-

al and international information campaigns informing consumers of the benefits and advantages of

the internal market, amongst these a common level of consumer protection across the European

Union.

1.1 Helping consumers to buy financial products cross-border

1.1.1 Knowing what is available

What would be the most appropriate channel to raise consumer awareness about the

different retail financial services and insurance products available throughout the Union?

Independent pan-European comparison websites, including information on cross-border products,

together with information campaigns by consumer groups, might be considered. However, to have

any effect in raising consumer awareness about the different retail financial services and insurance

products available it requires that the consumer is active on the market and interested in financiel

issues.

10 What more can be done to facilitate cross-border distribution of financial products through

intermediaries?

Consumers are often obliged to pay additional amounts to intermediaries for services related to

cross-border investments. This can be an obstacle to cross-border distribution of financial products

through such intermediaries.

Increased transparency in regard to the actual costs related to the cross-border investment could be a

useful way to increase competition between such financial service providers. In this regard we sup-

port the recent adoption of MiFID II, which obliges banks and other providers of investment ser-

vices to present the consumer with a clear picture of the costs incurred when trading using their

services. This is likely to increase comparability and competition. Additionally, MiFID II prohibits

inducements in certain cases which also works in favour of a price structure that is more conducive

to cross-border distribution of financial products.

With regard to the retail payments area the PSD2, which was recently adopted, aims to enhance

transparency and ease the process for firms that wish to exercise their right of establishment or the

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

freedom to provide services (‘passporting’). Until the impact of the new rules are assessed it would

be premature to consider new rules within the area.

Please also refer to the answer to question 9.

11 Is further action necessary to encourage comparability and / or facilitate switching to retail

financial services from providers located either in the same or another Member State? If yes,

what action and for which product segments?

Please refers to the answers given to questions 9 and 10.

12 What more can be done at EU level to tackle the problem of excessive fees charged for cross-

border payments (e.g. credit transfers) involving different currencies in the EU?

The new PSD2 aims to enable firms to provide innovative and efficient retail payments solutions.

Some of these new solutions address the very issue of cross border credit transfers, e.g Transfer-

Wise in the UK or Inpay in Denmark. The improved competition stemming from the implementa-

tion of PSD2 should be assessed before new rules within the area are considered. Furthermore, the

SEPA-regulation sets out requirements for cross border transactions in euro, which make up the

majority of cross border transactions in the union.

In addition, the IFR removes a former industry practice of territorial restrictions, which should ena-

ble better cross-border competition. As the IFR was just recently adopted the impact of the regula-

tion should be assessed before any new rules within the area are considered.

13 In addition to existing disclosure requirements

, are there any further actions needed to

ensure that consumers know what currency conversion fees they are being charged when

they make cross-border transactions?

Article 59 of the new PSD2 regulates the disclosure requirements for firms offering currency con-

version. The article addresses the very question raised. The impact of PSD2 should therefore be

awaited before additional or new rules are considered.

1.1.2 Accessing financial services from anywhere in Europe

14 What can be done to limit unjustified discrimination on the grounds of residence in the retail

financial sector including insurance?

Regarding bank accounts the danish government finds that, there is no need for new actions since

the Payments Account Directive (PAD) already prohibits dicrimination on grounds of residence

European Parliament legislative resolution of 8 October 2015 on the proposal for a directive of the European Parlia-

ment and of the Council on payment services in the internal market and amending Directives 2002/65/EC, 2013/36/EU

and 2009/110/EC and repealing Directive 2007/64/EC (COM(2013)0547

–

C7-0230/2013

–

2013/0264(COD)). See

Articles 59 and 60(3)

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

against consumers applying for or accessing payment accounts. The deadline for transposition of

the directive is 18 September 2016. It is therefore too early to speculate as to the effect of the PAD

in regard to basic payment accounts but also the services rendered by banks in connection with

them as we have yet to see the full effect of the directive.

Regarding insurance and residence requirements, it is not necessarily always unjustified to use resi-

dence as part of the risk assessment. Risk assessment is fundamental for the price and terms of the

insurance agreement. It is also in the interest of the insured, that the risk is assessed properly as it

will be reflected in the price, terms and conditions.

Furthermore, when it comes to mortgage loans the physical location of the collateral is crucial to the

terms and conditions of the loan agreement.

15 What can be done at EU level to facilitate the portability of retail financial products – for

example, life insurance and private health insurance?

In regard to pension and life insurance, the national markets for pension products are segmented

because national rules (tax law and social and labour law) impose a specific design of pension

products in each member state. This makes it very difficult for potential customers to comprehend

pension products cross-border.

The green paper touches upon the question of full portability of bank account numbers across bor-

ders. However, the existing infrastructure within the area is based upon current bank account for-

mats. The investments needed to introduce such portability would therefore be huge and would not

be commensurate with the benefits of doing so. This is underlined by the very low level of demand

by consumers for cross-border switching at present.

16 What can be done at the EU level to facilitate access for service providers to mandatory

professional indemnity insurance and its cross-border recognition?

Standardization of insurance products could be an efficient way to facilitate the portability of pro-

fessional indemnity insurance products. However such product would be limited by necessary indi-

vidual risk assessments.

1.1.3 Having trust and confidence to benefit from opportunitues elsewhere in Europe

Is further EU-level action needed to improve the transparency and comparability of financial

products (particularly by means of digital solutions) to strengthen consumer trust?

During recent years a vast number of consumer related directives have been adopted at EU level.

They include provisions that aim at enhancing transparency and comparability of financial products.

A high level of investor and consumer protection should continue to be sought. At the same time,

however, the various information requirements vis-á-vis consumers should be carefully fitted to

fulfil their purpose of informing consumers succinctly while avoiding information overload or dis-

proportionate requirements. One way of achieving this for future rules or revisions, would be to

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

make consumer testing an integral part of the process in order to ensure that all information re-

quirements are fitted to fulfill their purpose - not only the format of the information but also the

usefulness of the information requirement itself.

Furthermore, future possible harmonization efforts with a view to increasing comparability of fi-

nancial products, need to be done in such a way that product diversity is kept, particularly as re-

gards well-functioning national mortgage models. Otherwise consumers would be left with less

choice, not more. This would be detrimental for the competition – national and cross-border.

18. Should any measures be taken to increase consumer awareness of FIN-NET and its

effectiveness in the context of the Alternative Dispute Resolution Directive's implementation?

It is strongly supported that the Commission investigates the options for enhancing consumers’

knowledge of FIN-NET. FIN-NET is a strong tool for ensuring cross-border dispute resolution of

consumer complaints and thereby enhancing consumers’ confidence in purchasing financial prod-

ucts originating from another Member State. It is therefore important that as many consumers as

possible are aware of FIN-NET.

19.

Do consumers have adequate access to financial compensation in the case of mis-selling of

retail financial products and insurance? If not, what could be done to ensure this is the case?

According to Danish law, violations of rules on good business practices may cause financial under-

takings to incur liability under Danish Compensation law and pay financial compensation.

Access to compensation in case of mis-selling is important in order to ensure consumers trust in the

Internal Market. However, it should be for member states to set up the specific criteria for compen-

sation in accordance with their national legal traditions. Union law should only impose on member

states the obligation to ensure access to financial compensation for consumers but leave the specific

criteria to national law.

20. Is action needed to ensure that victims of car accidents are covered by guarantee funds from

other Member States in case the insurance company becomes insolvent?

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21 What further measures could be taken to enhance transparency about ancillary insurance

products and to ensure that consumers can make well-informed decisions to purchase these

products? With respect to the car rental sector, are specific measures needed with regard to

add-on products?

Ancillary insurance products are not within the scope of the Insurance Distribution Directive (IDD)

and therefore not covered by the information requirements that follow from that directive. In order

to empower the consumers it could be considered to launch information campaigns informing con-

sumers about the risk of either double insurance or buying an insurance for a risk that is already

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

covered by legislation, e.g. legislation on sales of goods. Alternatively it might be considered to

incorporate information requirements on ancillary insurance products in the next IDD-directive.

1.2 Creating new market opportunities for suppliers

1.2.1 Meeting the challenges and opportunites presented by digitalisation

22. What can be done at the EU level to support firms in creating and providing innovative

digital financial services across Europe, with appropriate levels of security and consumer

protection?

Today banks are in many ways front runners within the area of digitzation having provided their

customers with new digital services. A key element in providing the right opportunities for banks

and other providers of financial services is to ensure that there is a level playing field across

suppliers and borders.

It is also noteworthy that many consumers expect providers of financial services to use customer

data to improve sevices rendered and for these to be ever more easily accessible across multiple

platforms. It is in the interest of the consumer that banks are able to predict consumer needs and

offer them the relevant products at the appropriate time accordingly. However, there is a need for

protecting the consumer data at the same time as such data is available to be used for legitimate and

consumer friendly purposes.

When considering what might be done to support the development of innovative retail solutions in

the Union it is very important to keep in mind the reasoning behind the current regulatory frame-

work. Many of the new innovative firms offer services, which have been offered by established

market participants for a long time, e.g. crowdfunding offers debt and equity funding which is a

services that has existed for a long time. To ensure a level playing field it is necessary to consider if

the regulation in place for existing players is adequate, if special regulatory requirements are estab-

lished for new players. Further, the existing regulatory framework is there to ensure protection of

consumers and investors and financial stability. If regulation is eased for new players, that essential-

ly provide the same services as existing players, the protection is de facto lowered.

23. Is further action needed to improve the application of EU-level AML legislation,

particularly to ensure that service providers can identify customers at a distance, whilst

maintaining the standards of the current framework?

In order to fully benefit from the opportunities that arise from digitalisation, future rules need to

recognise the particular challenges stemming from digitization. In this regard banks signal that the

customer onboarding and identification process remains challenging due to lacking standards for

identification, digital IDs and differing interpretations of Anti Money Laundering (AML) and Know

Your Customer (KYC) requirements. The European Parliament and Council recently passed the

directive on the prevention of the use of the financial system for the purpose of money laundering

and terrorist financing (2015/849/EU). The directive does not exclude the use of digital IDs etc. It

actually follows from the directive’s annex III that non face-to-face customers may be considered as

high risk without certain safeguards, such as electronic signatures. Guidance on KYC from EBA in

relation to the directive is therefore important. The impact of the directive and related guidance

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

should be assessed before any new rules within the area are considered. However, a technology-

neutral approach is desirable.

24. Is further action necessary to promote the uptake and use of e-ID and e-signatures in retail

financial services, including as regards security standards?

The need for trusted e-identity and e-authentication mechanisms is vital to the development of the

digital internal market, including within the area of financial services. The recent revision of the

Payment Services Directive is a good example hereof. Establishing a single solution for banks and

public authorities increases recognition and usage and improves consumer trust. The Danish e-ID

solution, Nem-ID, is a single public and private solution with more than 4 million registered users

and with the largest share of transactions coming from interactions with the banks.

The impact of the new regulation on electronic identification and trust services for electronic trans-

actions in the internal market (2014/910/EU) should be assessed before any new rules within the

area are considered. However, an exchange of best practices between Member States within the area

could be a useful way forward to further promote the uptake and use of e-ID solutions, until the

impact of the eIDAS regulation is evaluated.

In this respect we would like to stress the importance of EBA defining technical standards for PSD2

that will not compromise the built-in confidentiality of the user’s security credentials between the

user and the IdP or trust service provider, as this built in confidentiality is a prerequisite for having

a single solution for banks and public authorities. Denmark has provided a position regarding this

for the EBA/DP/2015/03 discussion paper.

25. In your opinion, what kind of data is necessary for credit-worthiness assessments?

In order to make a credit assessment in relation to a mortgage, the credit institution both needs sufficient

information on the borrower and on the property in question. As regards the borrower, the relevant in-

formation includes monthly salary, other income, debt, assets, credit history (information on previous

defaults). As regards the property, is includes information from the land register (e.g. exact identifica-

tion of the property, liens and registered privileges).

26. Does the increased use of personal financial and non-financial data by firms (including

traditionally non-financial firms) require further action to facilitate provision of services or

ensure consumer protection?

When making electronic payments the payment service provider processes information on where

the payer has used his payment instrument, what he has bought and the amount of the purchase.

While these information may not be sensitive in the sense of the PSD2, as they cannot be used for

payments fraud, the data may still be sensitive to the consumer. It would be beneficial to consider

how a payment service provider is allowed to use these data. E.g. a payment service provider could

sell information on a given consumer’s payment habits (e.g. if the consumer makes frequent pur-

chase of alcohol) to an insurance provider, that uses this information in determining the price of an

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

insurance (e.g. health insurance). As payments are increasingly being digitalised such treatment of

data should be carefully considered.

27. Should requirements about the form, content or accessibility of insurance claims histories

be strengthened (for instance in relation to period covered or content) to ensure that firms

are able to provide services cross-border?

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28. Is further action required to support firms in providing post-contractual services in

another Member State without a subsidiary or branch office?

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29.

Is further action necessary to encourage lenders to provide mortgage or loans cross-

border?

The issues identified by the Commission in regard to question 28 and 29 relates to differences in

personal insolvency regimes and methods of valuation of property acting as collateral for the loans.

These issues is a potentially important part of possibly cross-border activity in the area of mortgage

loans and regular loans.

However, in light of the two nearly finalised studies on business failure and insolvency and on per-

sonal over-indebtedness that are due for completion in 2016, it is recommended to await the

outcome hereof, and consider whether further analysis is warranted prior to deciding next steps.

Further transparency regarding

valuation of properties in other Member States and enforcing of guar-

antees if necessary could be a way to encourage cross-border loan giving without a need for thorough

harmonisation.

1.2.2 Compliance with differing regulatory requirements in host Member States

30. Is action necessary at EU level to make practical assistance available from Member State

governments or national competent authorities (e.g. through 'one-stop-shops') in order to

facilitate cross-border sales of financial services, particularly for innovative firms or

products?

Establishing one-stop-shops where enterprises wanting to take up business in another country can

get an overview of existing legislation in the country and get information about the relevant authori-

ties responsible for supervision of the legislation could be a way forward to increase cross-border

sales. It is expected that such an initiative could make it easier for enterprises to take up business in

another country. One-stop-shops would thereby contribute to ensure that more financial products

are put at the disposal of the consumer.

ERU, Alm.del - 2015-16 - Bilag 227: Høringssvar vedr. grønbog for finansielle tjenesteyderlser i detail, fra erhvervs- og vækstministeren

However, it is important to strike the right balance of roles between supervising financial services

providers and offering counselling to these providers. Advice and consulting services on how to

organise a business model is not primarily within the sphere of national supervisory activities and

should be clearly separated from each other.

31. What steps would be most helpful to make it easy for businesses to take advantage of the

freedom of establishment or the freedom of provision of services for innovative products

(such as streamlined cooperation between home and host supervisors)?

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32. For which retail financial services products might standardisation or opt-in regimes be

most effective in overcoming differences in the legislation of Member States?

Standardization could be a measure to overcome differences in each member state’s pension and

life insurance products, though this should only be an opt-in option for the providers of pension and

life insurance products, and not a mandatory obligation, which can interfere with the excisting

products.

However, the providers of such a product with transverse

features will have to live up to best prac-

tise on solvency. Moreover, the

legislative framework of such standardization must also meet cer-

tain requirements. Fundamentally such a legislative framework should ensure a stable and predicta-

ble pension product for the insured and furthermore it should ensure a close connection between the

accumulation (savings phase) and the decompilation (pay-out phase) of the pension product.

33. Is further action necessary at EU level in relation to the 'location of risk' principle in

insurance legislation and to clarify rules on 'general good' in the insurance sector?

[---]

34. Please provide any additional comments in the box below.

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