BRUSSELS (Reuters) - The European Union’s plans to tighten up its oversight of financial firms have come under attack from industry and consumer groups that fear the move could hit businesses without doing enough to prevent misselling of risky funds.
The criticism comes after the European Commission on Wednesday published proposals aimed at ending national supervision of some financial industries in a bid to strengthen the EU’s common market and increase controls over foreign firms that operate in the bloc.
The expanded powers to monitor financial companies from non-EU countries could hurt Britain-based firms after the country leaves the EU and also U.S. businesses, which are among the most active foreign firms in the EU market.
“The commission’s proposed approach risks closing off Europe to third-country fund managers,” said Paul Schott Stevens, head of the Investment Company Institute, which represents U.S. funds.
In particular he criticized the EU’s plan to crack down on fund managers transferring activities to subsidiaries in foreign countries from the EU.
The commission, however, said this widespread practice could favor a laxer application of the rules and pose risks to the bloc’s financial stability.
But Schott Stevens labeled the move a form of protectionism.
“The Commission’s approach is likely to inspire policymakers in regions around the world to reconsider terms of access for European managers to their markets. New rounds of protectionism can only harm markets and investors around the world,” he said.
While some industry players saw the EU move as a power grab, consumer groups saw it as too timid. They accused the commission of not doing enough to increase its oversight of the financial sector.
“Misselling scandals, unfair commercial practices and the sale of rip-off, complex financial products continue unabated,” said BEUC, a European consumer organization.
It said the EU’s proposed reform was “weak” and it called for EU regulators to have more power to intervene in national markets to protect savers.
Misselling scandals have affected several EU countries after new rules on how to wind up failing banks shifted the burden of financial rescues from taxpayers to investors, increasing the risks attached to bonds and other financial products that have been seen as relatively safe.
The commission vice president Valdis Dombrovskis replied on Thursday, saying that under the proposed rules the European Securities and Markets Authority (ESMA) will be able to ban the marketing and selling of financial products “if it sees that efforts of national authorities were inadequate.”
Separately, the commission adopted on Thursday two acts to increase the protection of savers when they buy life-insurance policies and similar products. The move will force insurers to provide more information to buyers and to do more to prevent conflicts of interest.
Reporting by Francesco Guarascio @fraguarascio; Editing by Hugh Lawson