EBA publishes a report on the application of the guidelines on product oversight and governance arrangements

The report looks into how credit institutions have applied the requirements set out by EBA and identifies a series of good and bad practices.

These Guidelines, published on 22 March 2016, lay down requirements with which institutions must comply in the design and sale of retail banking products and services. They include the identification of the target market, product testing before a product is brought to the market and ongoing monitoring of products and services, as well as the selection of appropriate distribution channels. The Guidelines were issued with the purpose of giving rise to changes in the organisational culture of credit institutions, by stressing that they must ensure that the needs, interests and characteristics of consumers are being considered.

The report which has now been published was built on the shared experience of six Member States (including Portugal) and showed that:

• Institutions have been changing their internal arrangements to comply with the Guidelines, namely in terms of internal governance and processes;

• In many cases, the needs, interests and characteristics of consumers did not quite receive the same level of attention as was given to commercial interests;

• The industry has different understandings of the Guidelines, including the concepts of products or services identified as “new” or “significantly changed”, which may signal the need for greater supervisory convergence in Europe.

In its report, the EBA also indicates that it will consider issuing further guidelines or clarifications on this matter.

Overview

At the end of 2018 the EBA set up a working group comprising six national supervisory authorities, including Banco de Portugal. The group was tasked with drawing up a survey, which was then sent to a number of supervised institutions in each of the participating Member States, to a total of 30 institutions.

The report which has now been published is the first stocktaking by the EBA of market practice on governance arrangements and monitoring of retail banking products, and conveys the assessment of responses obtained from the survey.