NÁRODNÁ BANKA SLOVENSKA 1 Improving of Financial Services Consumer Protection - The Way to Decrease The Information Asymmetry In the Financial Market Slavomír Šťastný

2 Consumers vs. Other Participants In Financial Market  Consumers – financial services recipients are entitled to protection based on specific acts of financial market  Financial institutions, financial intermediaries and advisors – financial services providers / intermediaries are entitled to perform licenced activities

3 Asymmetry In The Financial Market  Information and professional asymmetry:  Financial services providers and intermediaries appropriate professional competence, professional marketing and promotion  Consumers non-professional users, weakly educated, readily influenced by pointed advertising

4 Three Areas For Improvement Of Consumer Protection  Increased consumer protection, especially legal protection in disputes from contractual relation with financial institution  Support of financial education  Modification of regulation in area of financial services intermediation and financial advising

5 Protection Of Clients Of Supervised Subjects  Financial institutions supervised by NBS vs. non-banking subjects that are not regulated and supervised Fulfilment of the duties of information and notification of the subjects in the financial market Observance of binding rules for contacts with client Protection of handling of the assets of depositors as well as client assets of investors

6 Consumer Awareness of Financial Services and Their Comparability  Internet site of NBS – from July 2006 Data about bank fees  possibility of comparison + competitive pressure  Comparison of the costs in others sectors is still lacking

7 Consumer Protection In Disputes  Disputes resulting from contractual relations Are not subject to the supervision of the financial market Proceedings and decision-making pertain to appropriate courts (Civil Procedure Code)  Out-of-court dispute resolution The Arbitrary Court of the Slovak Banking Association In many European countries - ombudsman institutions

8 Increased Need For Financial Education  The OECD analysis underlines the importance of long-term financial education for the population  Different stages of their lives  different types of financial products  different educational programmes

9 Financial Education vs. Institutional Framework For Consumer Protection  Financial education Improving of understanding of financial products and concepts  Institutional framework for consumer protection Social safety net for consumers who are unable or unwilling to undergo financial education

10 Increasing Professional Skills For Performing Intermediary And Advisory  Deepening of financial knowledge  Uniform rules for specialist skills and extent of testing  Independent certified financial advisor

11 Financial Intermediation vs. Consumer Protection  Financial intermediaries and advisors influence the financial decisions of consumers  Possibility of intermediary or advisor failure  special skills is necessary  Need for common approach for legal regulation of mediation and advisory activities in the financial market

12 Current Legal Framework  Activities of intermediaries in separate areas of financial market are legally regulated by specific Acts; regulation is not unified  Absence of general definition of the concepts of „financial mediation“ and „financial consulting“

13 Current Legal Framework  Intermediation of insurance, investment services and supplementary pension savings is in detail regulated  On the other hand intermediation of other financial services including providing loans, instalment sale, home savings are weakly or not regulated

14 Financial Intermediation  Activities leading to create for the client the opportunity to conclude the contract with financial services provider  Is linked with financial service  Financial intermediation includes: Contract preparation, conclusion of the contract, management of contractual claims

15 Financial Consulting/Advising  Providing of personal recommendations to the client in connection with intermediation of one or more financial products or services  Is governed by the client´s interests

16 Unified Legal Framework A unified legal framework will (among others) define/determine: The persons who may perform mediation and/or advisory activities The conditions for licencing / registration The basic conditions for the performance of activities – special skills The conduct of business rules – with effort to minimize the risk of unsuitability of service for client

NÁRODNÁ BANKA SLOVENSKA 17 Thank you for your attention