CI’s Justin Macmullan sets out three challenges for the G20 finance ministers ahead of their meeting on 14 February.
Five years ago, at the 2008 G20 meeting in Washington, the assembled leaders announced that, from then on, they would ensure that “all financial markets, products and participants would be regulated or subject to oversight, as appropriate to their circumstances.”
In the immediate aftermath of the financial crisis, it was a dramatic admission that financial markets are too important and too volatile to be left to their own devices.
However it was not until 2010 (and after a widely supported campaign by CI and our members) that the G20 turned their attention to the regulation and supervision of consumer financial services. In no small part this was due to recognition that these services also have an impact on financial stability.
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That recognition set in train two important pieces of work.
Firstly, a report from the Financial Stability Board (FSB) underlined the link between financial consumer protection and financial stability and made three proposals – the establishment of a new international body for financial supervisors, work on institutional arrangements for national supervisors and regulators, and strengthening of the tools available to supervisors.
Secondly, the development by a G20/OECD taskforce of a set of high level principles for financial consumer protection which are now being further developed through ‘effective approaches’ for their implementation.
Consumers International played an important part in these developments, campaigning for the work to begin and contributing to the work of the FSB and G20 / OECD taskforce through the development of our own CI recommendations to the G20, detailed responses to written drafts and consultations with members.
So, five years on from the G20’s commitment that “all financial markets, products and participants would be regulated or subject to oversight, as appropriate to their circumstances”, what remains to be done at the international level to ensure consumers of financial services are properly protected?
CI would suggest three broad priorities for this year.
Firstly, the G20 must ensure that the work they have started is completed with haste. Banking scandals continue to undermine consumers trust in financial service providers and in the midst of reforms in several countries it is important that governments and regulators have clear guidance from internationally agreed standards.
However there has been a worrying loss of momentum over the last few months, particularly in comparison to the progress made during 2011.
Therefore it’s important that all G20 countries now contribute the necessary time and resources to ensure that the international commitments they have made are met quickly and according to a clear timetable.
Secondly, alongside accountability for the commitments the G20 have made, there should also be transparency.
An open and modern process should be a given, but if you look for information about the work that is being done by the G20 on financial consumer protection - it is hard, if not impossible, to find.
Greater transparency will not only lead to better results but will also help to push the process forward as more national agencies and organisations are aware of what is being done.
Finally, this is important work and should not end when the papers are written and the reports sent out to national capitals.
The G20 have committed to implement the financial consumer protection principles in their jurisdictions and this should be monitored through a peer review process that will demonstrate impact and enable all countries to continue to learn lessons from what has been done.
Of course this is by no means all that needs to be done. Real challenges remain in the design and implementation of policies at the national level, but if these international processes move along at pace and deliver strong results, they can provide the support that is needed for this urgent national work.