Březnový rozhovor pro časopis Czech Business Weekly, věnovaný boji s bankami, finančnímu vzdělávání a (ne)ochotě České národní banky spolupracovat na ochraně spotřebitele. V angličtině.
Q: Annoucement of the Ministry of Finance that it will propose three amendments to the Commercial Code in March, including a ban of the account termination fees and obligation to inform the clients about the change of the pricelist a month ahead, caused an uproar amongst the rest of the expert group that was forem to discuss these issues. Both representaives of the banks and Czech National Banks said they were not informed or involved in any discussion about the proposals. Did you consult the amendments with them?
We have always been saying that we will try to push through some of our requirements in the form of amendments of the Commercial code or other legislation. It’s nothing new. The banks and other members of the expert group have received the proposals beforehand so that they could review it and come up with their comments and proposals for changes. I’m surprised by their reaction, even more so, that the two of the three amendments we propose are part of the banking codex put together by banking association. They have agreed on it and have been promising to implement it, so I don’t understand the objections.
Q: Why are you proposing changes before Czech National Bank finishes the analyses of a financial market it has been working on?
It’s not just the Czech National Bank that is finishing it. It is something that the Czech National Bank does together with the Ministry of Finance, not by itself. It is about to be finished, our lawyers are meeting theirs next week to finetune the details and I expect that the final version will be ready a week or so later and will be given to the banks and other financial institution.
Q: Why did you propose those changes now? Is it connected with upcoming elections?
Rather than with election it is connected with election cycle. There were two versions of what we might do. If we had another a year’s time at hand, we would finish the analyses and then take time to come out with not three but let’s say fifty proposals. But there are issues that need to be discussed further and in more detail. The proposals we raised now concern only issues that were already agreed on by the industry. All banks themselves, apart from one, agreed that they will not charge clients for termination of their accounts, the banking code of conduct says the banks will inform the client about the change of the price list a month ahead.
Q: If the banks agreed on it and put it into the banking codex, why do you need to change legislation?
The problem with banking codex is that it is not binding for anyone. Banks can freely decide whether they will follow it or not. Moreover, even if they decide to follow it, there is no self-regulatory process to make sure that those who agreed on it, really comply with it. If clients find that their bank does not follow its promises, despite of proclaiming it, he or she might send a letter to the banking association. But there is no defined process of what the banking association will do about it – instead of naming and shaming the offending bank (which is what peer pressure does in well-functioning selfregulatory organistaions) they might just as well throw the letter to the rubbish bin. The legislation also has an unlimited time span of validity, while codes might be easily changed.
Q: What will be an output of that analyses ministry and Czech National Bank prepare?
It is a general survey of how current legislation defines consumer rights in financial services to make it clear for everyone and also find where legal loopholes or overlaps are. The analysis will serve two purposes: remind everyone what is already required by law – and provide the background for future legislative work. For example a bank may claim that it is not able to or it is too costly to make sure customers do not get advertising leaflets with their bank statements, if they do not want to. But they are already required by law to do that.
Q: What is the role of an expert group and what outcomes is it supposed to bring?
We are still trying to come out with a framework of how to communicate and how to get the whole financial market and consumers involved in the discussion. The aim is to create a platform that would bring together the representatives of all segments of the market, consumer associations and the state. We need to make sure that it will be an effective platform for reaching consensus, not just a discussion club some would like to turn it into. Two things are already under way – the legislative analysis and a thorough debate on financial education for consumers.
Q: When the larger forum will come into the existence?
The next round is at the end of March. It is quite a complicated matter to coordinate the whole of the financial market and consumers and still make sure everyone’s opinion is voiced without having a size of a Parlament. The big issue is how binding the agreements of this forum will be for all sides.
Q: Does the communication within the group work well?
Yes, there were no problems, till the last week (Feb 27 – March 3) that really surprised me. I thought we worked together well.
Q: Michaela Erbenová, who represents the Czech National Bank in the expert group, said she is considering leaving it.
She did not say that to me in person. This was reported in the press, but I do not know how serious she was – or even if she really meant it the way it was reported. I talked to her and exchanged e-mails with her since then and she never mentioned leaving the group. When we brought up the issue of transparency and client interests in the banking sector last summer, Czech National Bank refused to participate in the discussion. I think it is good that they now decided to be a part of the debate because they can bring a valuable contribution. If we want a quality discussion, the regulator of the financial market should be included. If they leave the expert group now, it would be an empty and vain gesture which would not benefit anyone. The truth is that the relationship between the Czech National Bank and the ministry is better than in the past. Michaela Erbenová and me have always been able to discuss things and arrive to conclusions over important issues. And it is my priority to make sure the CNB has every opportunity to be involved.
Q: Apart from the amendments Bohuslav Sobotka will propose in March, does the ministry want to ban or regulate any other banking fees?
No, the ban to charge for terminating accounts and the ban to charge for complaint handling, are the only ones. We see that public pressure works. Most of the banks abolished the most controversial fees and the price increases have also been much lower than in previous years. The amendments are to make sure that after the banks agreed to stop charging the clients some fees, they would not return to it after the issue is out of the media spotlight in a year or so.
When deciding where is the line of the involvement of the government, we consulted the issue with associations for consumer protection. Their attitude was very simple: people took those complaint handling fees as a threat, they were afraid to complain about banks because they could have been charged quite a lot of money for their complaints. In a similar way, a fee for termination of the account is a clear message to the client – don’t go or we will punish you for that.
Q: What is the role of the ministry in regulation of banking sector?
We are doing things that we can and that we are entitled to. Czech National Bank is responsible for prudential supervision of the market. Their responsibility is to make sure the banks will not go bankrupt and do not get into financial trouble. Czech National Bank has always proclaimed that consumer rights protection in the financial sector is not their field and they have historically refused to be involved. The Ministry of Finance is responsible for proper functioning of financial market, and that is what we do by making the market more transparent for the clients and more competitive. We cooperate with the Ministry of Industry and Trade that is in charge of consumer protection in general and we now have a system of cooperation built on the expertise of both institutions.
Q: Part of your proposals is creating an institution of a financial ombudsman, what executive power would he or she have?
He should work as an financial arbitrator for the whole financial sector. He should also monitor the amount and transparency of the information the clients get from financial institutions because the lack of clear and understandable information is a serious limitation for having a competitive market. He should have a legal power to issue directives to order what information and how the clients should receive with financial products.
Q: Isn’t that what ministry is doing right now? Also other markets like telecommunication market have similar problems with not completely transparent price lists. So why there should be an special institution for financial institution installed?
We cannot play the role of the white knights for the whole country and all sectors. The truth is that financial markets are complicated and in every civilized country the state is involved with the way the clients are informed and there are strict rules on how to proceed in case the client is misinformed.
