The European Commission's Retail Investment Strategy raises major concerns

Firstly, the impact assessment is partial in many aspects and is often composed of a series of statements lacking factual grounds, evidence, or reliable data. Therefore, it does not constitute a solid basis to support the measures included in the proposal.

The European Commission claims it took the decision not to put forward a full ban on inducements as part of this proposal. However, the provisions of the proposal lead, in practice, to a very broad ban on inducements, especially for life insurance and securities accounts. Presented as a compromise and a staged approach, it is not fundamentally different from a full ban. In addition, three years after the adoption of the package, the Commission will consider proposing further extending the ban on inducements, which is its real objective, according to the impact assessment.

Today, there are different distribution models, with or without advice, through branches or on-line, fee-based or commission-based. These models coexist and savers can freely choose between them based on their income and wealth, as well as on their financial knowledge, with open competition between the models.

Banning most inducements would be a distortion of competition through regulation, by calling into question the universal and relational banking model in favour of the transactional model of brokerage, and would leave a whole segment of potential investors to fend for themselves. The consequence would be an advice gap, well documented in the countries applying the ban on inducements, and a more exclusive financial market, tailored for the richest consumers who concentrate most of the savings, and inducements.

Another consequence would be a pressure toward the reduction in the network of bank branches providing local distribution of financial products and advice to all consumers, as experienced in countries that have banned inducements. This is not the appropriate way to grow retail investor participation in capital markets, since the vast majority of European households have a modest financial portfolio  ̶  the median is around €10,000  ̶  and limited financial literacy.

Secondly, the value for money approach could have been fruitful. Unfortunately, in the proposal, it is only driven by a cost-killing purpose, mainly based on price benchmarks, without due consideration to qualitative aspects. On the financial market, as in other trades, service matters. The provision of distribution in rural areas has a value, and a cost, advice has a value and a cost. In addition, at a time when ESG is a major concern, focusing only on yield is not appropriate, since sustainable investments may not be the immediately most profitable and would require more time to sell.

This results in the feeling, reinforced by reading the impact study, that the real purpose of the value for money check is only to get rid of inducements in another way, since they are the counterpart of qualitative services provided to consumers, beyond quantitative product aspects.

Thirdly, contrary to the stated purpose of regulatory fitness and simplification of the framework, there are many provisions increasing the administrative burden. Namely, a cumbersome, bureaucratic benchmarking process introducing a regulation-driven price intervention into capital markets, or new complex processes and compliance obligations. This is unlikely to pave the way for a vibrant EU capital market, able to compete at the global level.

This is the beginning of a long process, and we are sure that the legislative procedure may improve this proposal, to really deliver the Capital Markets Union the EU deserves and to ensure its financial autonomy and sovereignty.

We stand ready to contribute positively to this debate, and are open to dialogue with all European regulators to ensure that the Retail Investment Strategy truly achieves its objectives of protecting and advising investors as well as financing the economy and its transitions, whilst respecting the existence of a banking business model, the universal one, that has proven its value both for the customers and for the stability of the system.