2013年-EBA欧洲银行管理局_JC-2013-77_28POG_Joint_Position29_7页_277kb

Summary of JC-2013-77: Joint Position on Manufacturers’ Product Oversight & Governance Processes

Core Content

The Joint Position JC-2013-77 is a document issued by the European Supervisory Authorities (ESAs), comprising the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA). It outlines high-level cross-sectoral principles on the product oversight and governance processes of financial institutions, aiming to enhance consumer protection and ensure consistency across the banking, insurance, and securities sectors.

Main Objectives

• To strengthen internal controls of manufacturers before product launch.
• To discourage products and services that may cause consumer detriment.
• To ensure that products meet the needs and interests of their target markets.
• To promote cross-sectoral consistency and cooperation among the ESAs.

Key Principles

The following principles are outlined for manufacturers:

1. Establish, implement, and review product oversight and governance processes continuously to minimise consumer detriment and avoid conflicts of interest.
2. The executive board should endorse these processes, and senior management must ensure compliance before and after product launch.
3. Identify the target market and ensure the product meets its objectives and interests.
4. Conduct product testing in various scenarios, including stressed scenarios, to ensure alignment with target market interests.
5. Ensure transparency in product charges and features.
6. Select appropriate distribution channels and provide clear, accurate, and up-to-date information to distributors.
7. Periodically monitor the product’s performance and review it as needed to maintain compliance.
8. Take appropriate action when consumer detriment is identified or anticipated.

Legal Basis

• The Joint Position is based on Article 56 of the ESA regulations, which empowers the ESAs to reach joint positions on cross-sectoral issues.
• It is also grounded in Article 2(3) of the ESA founding regulations, which outlines the cooperation through the Joint Committee.

Scope and Application

• The principles apply to products or services predominantly targeted at consumers in the banking, insurance, and securities sectors.
• They are not directed at distributors, but rather at manufacturers and competent authorities.
• The principles do not require or introduce product approval, licensing, or prohibition by NCAs.
• They are without prejudice to existing or future EU and national regulations, which may impose additional requirements on distributors.

Explanatory Notes

• The ESAs were established to foster consumer protection and promote financial stability.
• The Joint Committee conducted a survey in 2012 among National Competent Authorities (NCAs) to:
  • Identify problems or failures in product development and governance.
  • Map national initiatives.
  • Collect opinions on the need for cross-sectoral principles.
• The survey results showed that poor product oversight led to consumer detriment, loss of confidence, and prudential risks for financial institutions.
• The principles are proportionality-based, taking into account the type of product, financial instrument, or service.

Next Steps

• ESMA will develop further guidance on product governance and distribution, in preparation for MiFID2/MiFIR.
• EBA will use these principles to develop detailed requirements for banking products, based on Article 74 of the Capital Requirements Directive, Article 10(4) of the Payment Services Directive, and Article 3(1) of the E-Money Directive.
• EIOPA may include product governance provisions in the Insurance Mediation Directive (IMD1) or future legislative acts, and these will be supplemented by Solvency II requirements.
• The Joint Position will be effective upon endorsement by the Boards of Supervisors of each ESA.

Annex 1: National Markets Survey

The survey highlights various issues across the EU:

• Securities sector: Products like unregulated collective investment schemes and structured products have led to consumer harm due to opacity, illiquidity, and lack of regulation.
• Insurance sector: Unit-linked products and structured insurance products have caused high costs and lack of transparency.
• Banking sector: Structured products, hybrid financial instruments, and mis-selling have raised concerns about risk disclosure, product complexity, and consumer protection.
• Payment Protection Insurance (PPI): The UK has experienced large-scale mis-selling, resulting in a £12bn compensation scheme.
• Mortgage insurance products: Issues include conflicts of interest, lack of direct claims, and terms submitted to banks, not borrowers.

Conclusion

The Joint Position serves as a common framework for product oversight and governance across the three financial sectors, aiming to protect consumers and ensure regulatory consistency. It is a preliminary step towards more detailed sector-specific regulations and is expected to be developed further by the ESAs in the coming years.