July 05, 2019

EBA published the first report examining the way industry has implemented the EBA requirements on the guideline on product oversight and governance arrangements. EBA issued the guideline in 2015 to address large-scale retail conduct failure and mis-selling that was observed in the banking sector at the time. The report identifies a number of good and bad practices and outlines the next steps that EBA will take to fulfill its supervisory convergence mandate. EBA will reflect on the findings in this report to identify specific actions, such as guidance and further clarifications, which may be needed to address the issues raised.

This assessment, which uses a small sample of credit institutions from six member states, shows that manufacturers have made welcome changes, particularly in terms of processes and governance. However, in a large number of cases, customer interests may not quite receive the same attention as the manufacturer's commercial interests and prudential concerns. The EBA assessment also suggests that the industry may have different understanding of the guideline and that further clarification may be warranted to ensure further convergence across Europe. One of the identified priorities, as stated in the EBA work program for 2019, is for EBA to ensure a consistent implementation of the EBA consumer protection requirements by financial institutions.

EBA has developed these detailed guidelines on product oversight and governance arrangements for the retail banking products to address some of the conduct risks, which result in fines, settlements, and redress payments. The guidelines cover retail banking products that fall into the EBA consumer protection remit, which are mortgages, personal loans, deposits, payment accounts, payment services, and electronic money. The guideline is intended to ensure that products are developed and brought to market in a way that focuses on the needs and interests of the consumer and, in so doing, to reduce conduct costs and contribute to market confidence. EBA promotes a transparent, simple, and fair internal market for consumer financial products and services and seeks to foster consumer protection across EU. 

 

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Keywords: Europe, EU, Banking, Conduct Risk, Product Governance, Guidelines, POG, Operational Risk, EBA

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