The regulators’ conduct focus on product governance is likely to evolve from distributor issues such as point-of-sale, disclosure, inducements and conflicts of interest to the manufacturers of products – but they ruled out any moves towards product pre-approval, favouring extension of existing governance principles. Supervision, rather than regulation, continues to be seen as being the preferred route to achieve better outcomes for consumers on the pricing of products – but the threat of greater intervention at a later date remains.
Getting the right products to the right customers and overall suitability will continue to be a key theme, especially as MiFID 2 moves through to implementation. Cross-selling and therefore cross subsidy is seen as something deserving particular focus in the future through stricter rules and enhanced supervision.
Financial innovation remains a contentious issue, with concerns on both sides on the costs/benefits to consumers of structured and complex products. The industry continues to count the costs of fines and compensation claims but there is recognition from the supervisors that fulfilling the needs of customers needs to be balanced with an acceptance of a certain degree of risk – the key question is how the industry ensures consumers are aware of the risks and are willing to bear.
For some countries, this new ‘scope’ will push the boundaries significantly and will present considerable challenge to business models.
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