Better finance - La lettre de l'été 2015
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Better finance - La lettre de l'été 2015
The Better Finance quarterly newsletter is now available to all stakeholders who would like to stay up to date with the latest developments in financial regulation and legislation at the European level. Please sign up to the newsletter if you would like to receive the autumn edition and future newsletters from Better Finance. If you would rather be taken off the mailing list, please unsubscribe here or by clicking on the unsubscribe button at the top or bottom of the newsletter.
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The Better Finance quarterly newsletter is now available to all stakeholders who would like to stay up to date with the latest developments in financial regulation and legislation at the European level. Please sign up to the newsletter if you would like to receive the autumn edition and future newsletters from Better Finance. If you would rather be taken off the mailing list, please unsubscribe here or by clicking on the unsubscribe button at the top or bottom of the newsletter.




On July 8 the European Parliament voted in favour of the proposal to revise the Shareholders Rights Directive, published in April 2014 by the European Commission.

Early May, the European Parliament's legal affairs committee (JURI Committee) had already backed amended rules by a narrow vote of 13 to 11. However, considerable differences among European Parliament's political groups resulted in the rapporteur, MEP Sergio Gaetano Cofferati, submitting the vote to plenary.

The proposal was approved by 556 votes to 67, with 80 abstentions and MEPs will now enter into informal talks with member states aimed at seeking an agreement on the final version of the legislation.

“Intended to boost transparency and foster shareholders' long-run commitment to companies”, the voted rules set out a country-by-country reporting obligation, under which large firms and listed companies would be forced to disclose information on profits made, tax paid on profits and public subsidies received.

The Parliament also agreed on rules on a « say on pay » by shareholder with a view on allowing them to vote at least every three years on a listed company's remuneration policy for directors. It would then be up to each member state to decide whether a vote on remuneration policy at the general meeting of shareholders would be binding or advisory. However, it is unfortunate to note that the existing barriers to shareholder engagement within the EU are still to be overcome.

The decision by the European Parliament with regards to European individual shareholders' rights has been very disappointing indeed.

In order to “steer companies and investors towards long-term oriented decision making and ensure the engagement of institutional investors”, it would definitely have helped if individual cross-border shareholders (those domiciled in a Member State of the EU other than the issuing company) would have been able to exercise their voting rights without having to pay huge fees to do so. But this proposal for amendment by Better Finance was not taken on board by MEPs. As for individual investors whose shares are registered in nominee or omnibus accounts, the persistent failure of financial intermediaries to identify the beneficial owners of shares and send voting materials still prevents them from voting. MEPs also turned down Better Finance's proposal for amendment in order to facilitate the creation and operation of shareholder associations in Member States to enable individual shareholders to have a greater say in General Assemblies.

Ultimately, individual shareholders will not necessarily have an effective say on executive remuneration.

With their rights being ignored, it is fair to say that we are now looking at a Capital Markets Union without a single market for EU-wide shareholder engagement. As the ECON vice-chair rightly put it, the SRD is turning into an “Intermediary Rights Directive”.

What's next?

  • No agreement has yet been reached with the Council. Luxembourg hopes to make progress on this issue during its 6 month presidency of the Council from July to December 2015. In the case of differences, the Parliament and the Council, as well as the Commission will sit down to work out a compromise in Trialogue. The earliest that any agreed text will emerge is the end of 2015 if not early 2016.
  • The SRD rapporteur, Sergio Cofferati, has a mandate to start negotiations with the Council. However, the Council has delayed adopting a first reading position and decided to follow the European Parliament's recommendation to consult member states before starting negotiations with MEPs.

Read more




During what passes for summer in Brussels, all work at EU level grinds to a halt as the European mandarins abandon the city to reconnect with their roots or seek out the sun. It's a good time to take stock of some of the developments at the heart of Europe.

As one of the Commission's flagship initiatives, the Capital Markets Union (CMU) has dominated the financial headlines ever since it was first alluded to by Juncker more than one year ago.

From the onset, there seems  to  have been a  consensus  across  the  board  that broadening  and  deepening  EU  Capital  Markets  -  in  order  for  these  to  complement  the struggling and costly banking sector in the financing of the European economy – will be key to achieve the hitherto elusive growth Europe seeks.

Better Finance also warmly welcomed the initiative and the perceived intention to address the concerns of the actual users of retail financial services within the framework of the CMU. By now though, these initial expectations of impending improvements for financial services users have been all but quashed. Nothing in the renewed EC “short term priorities”towards a CMU indicates the intention to address the issues of dismal investor trust and lack of protection.

With an abundance of investable private capital in Europe and households desperately looking for positive real returns on their savings in an ongoing climate of financial repression, the explicit ambition by the European Commission to tap into people's saving pools and boost retail investment is made abundantly clear: “households are the main source of funds to finance investment”.

Yet, despite some reassuring words, nothing in the short-term priorities towards a CMU indicates a willingness or ambition to tackle barriers to retail participation in capital markets such as investor protection.

We're at a crossroads where we must choose between leaving capital markets in the sole hands  of  a  few  financial  institutions  or  seize  this  unique  opportunity  we're  presented with,  to  rethink how  capital  markets  work,  bring  the  different  market  participants together and restore much-needed trust.

Meaningful retail participation and renewed trust in capital markets can only be achieved if investor protection rules for all saving and investment products, including pension products and individual shares and bonds, are improved and harmonized.

Not only should the rules be harmonized across the board, they should also be effectively enforced at the European level, with reinforced European Supervisory Authorities fulfilling their consumer protection mandates.

There's a dire need for simplified and standardized retail investment products that could generate real competition and in turn bring fees and charges down. This process should go hand in hand with a reduction in the sale of Alternative Investment Funds to retail investors. For too long individual investors and savers have been crowded out of equity markets and pushed into under-performing packaged products.

To  ensure  long-term  growth  it  will  be  crucial  to rehabilitate  equity  investment  across the board and ensure a level playing field for all market participants. A Capital Markets Union is a potentially great idea that deserves input by all stakeholders involved.  If it can help reconnect those companies and projects that need capital with those who have it and want to invest it, then it may well succeed in what it set out to accomplish in the first place.

What's next?

  • Better Finance sent a Letter to Commissioner Hill asking to take individual investors into account: "The proclaimed focus on EU citizens as savers and individual investors must be translated into the Priorities for action on the Capital Markets Union".
  • In his answer Lord Hill agreed "that promoting transparency, simplicity and fairness in the market for consumer financial products" is essential. He added that a concrete Action Plan based on ideas that emerged from the consultation will be published towards the end of September 2015.

Read more

  • Better Finance Press Release – Return Capital Markets to their natural participants
  • Better Finance Briefing Paper - "An EU Capital Market Union for Growth, Jobs and Citizens"



At the beginning of the summer the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the creation of a standardised pan-European personal pension product (PEPP).

The objective of the PEPP, as stated by EIOPA, is to encourage EU citizens to save for an adequate retirement income by creating a “simple, transparent, cost effective and trustworthy” product.

According to EIOPA, a PEPP that is clearly distinguishable from regular financial products should go a long way towards ensuring “a level playing field between all providers” and remove existing barriers to cross-border business and, thus, facilitate cross-border offering of PEPPs to consumers as well as facilitate a multi-pillar approach to pension saving.”

Better Finance is an avid supporter of a simple and cost effective Pan-European savings vehicle for retirement that protects the long-term purchasing power of savings, provided that it is readily accessible and understandable to anyone within the EU without the need for advice. Contracts should have transparent and easy-to-understand clauses that clearly outline the conditions for early withdrawal.

Such a PEPP should be supervised by public authorities at the EU level ensuring that at the very least the long term purchasing power of pension savings are protected.

In case it matches these requirements and is not disadvantaged in terms of taxation by Member States, such a pan-European Personal Pension Plan would definitely be heartily welcomed by EU pension savers.

What's next?

  • The consultation runs until 5 October 2015.
  • Better Finance's Managing Director will speak at EIOPA's Public Event on a Pan-European Personal Pension Product,  7 September,  Frankfurt

Read more

EIOPA outlines vision on pan-European personal pensions; IPE




Every time you make a payment using a debit or credit card, the retailer is charged a fee by the credit card company. This amount will not feature on any of your receipts but you can be sure that you - as well as "cash" customers for that matter- will have paid for it in a roundabout way since this cost is generally added to the prices of goods and services by those businesses who are contrived to pay fees for offering the option of card payments to their clients. The cost of these fees is therefore ultimately borne by consumers.

Since these fees constitute a profitable source of income for banks (as well as the card issuers), keeping them as high as possible is the name of the game. The business model is perfectly adapted to this end, since consumer banks negotiate terms with credit card companies and close a deal with the provider that offers the best MIFs (multilateral interchange fees that are paid by the retailer's bank to the consumer's bank), essentially obliging customers to use the credit card on offer or change bank.

A further element preventing competition in this market is the fact that credit card companies oblige banks to charge the MIF of the country where the transaction takes place, making it impossible for retailers to look for better rates abroad. Retailers are left with no choice but to adapt their prices to this reality and pass on the cost to the consumers.

The European Commission has been looking into the issue and in its latest move issued a Statement of Objection aimed at Mastercard and focusing on the fact that the current MIF system makes it impossible for retailers to benefit from lower fees offered by banks in other European countries.

This follows a proposal by the European Commission for a legislative package related to the the EU payments framework, comprising a welcome cap on Multilateral Interchange Fees and the review of the Payment Services Directive. Better Finance supports these initiatives seeing that significant action is still required in the area of payment services in order to achieve a true EU Single Market and to guarantee fair treatment of consumers vis-à-vis merchants and providers of payment services.

As part of the regulatory package, the prohibition for merchants to surcharge payments with MIFs-capped cards and the limitation of customer liability for unauthorized or fraudulent transactions to 50 instead of 150 Euros will bring about significant improvements for financial services users.

Whereas steps are taken in the right direction, Better Finance warns of potential issues arising from the new legislation. In order for the new rules to have their intended effects, it is vital to ensure that the capping of interchange fees does not result in undesirable rises in fees for consumers, with financial institutions and/or merchants benefitting from the proposed rules instead of the credit card users.

Better Finance calls on the European institutions to address this key concern for financial services users.

What's next?

  • The multilateral interchange fee (MIF) regulation was passed on 20 April 2015 and hence will come into force 6 months after it is published in the official journal of the European Union.
  • European payments regulation driving change

Read more

  • Better Finance Press Release: "The  reform  of  the  EU  payments  framework:  a very  necessary  step  but  further  guarantees  for consumers are needed"
  • Multilateral Interchange Fees Factsheet BEUC



Already two years down the line and the 10th round of TTIP (Transatlantic Trade and Investment Partnership) negotiations nevertheless had a distinct air of déjà vu about them, as they once again broke down over the Investor State Dispute Settlement (ISDS) provision of the proposed treaty.

But what is all the fuss really about? Why do so many people feel so strongly about this ISDS instrument? The BBC World Service took a deeper look at the issues at stake in a very comprehensive 25 minute radio documentary that goes some way towards answering these, and other, questions.

In short, the ISDS instrument would allow investors on one side of the Atlantic to sue a government on the other side if they believe the government in question damages their commercial interests. This is nothing new. Bilateral investment treaties have since long contained provisions similar to the disputed ISDS and proponents will argue that such agreements prevent States from resorting to force in order to get property back or protect companies against nationalisation.

What is new though is that lawyers finally caught on and discovered the power of these instruments at the turn of the millennium. Whereas more than 1500 bilateral investment treaties were in place by then, they were largely ignored and forgotten until lawyers started realising their potential. As the International Dispute Resolution Center in London attests, this very secretive arbitration business has been booming ever since.

Seen as anti-democratic and rigged in favour of institutional investors, these secretive arbitrators and the ISDS system have come under increasing scrutiny and criticism over the last decade. Some high profile cases have shed a negative light on these bilateral investment treaties, with various instances of health and environmental policies being challenged by institutional investors.  (Listen to the BBC broadcast for some very illustrative cases of ISDS controversies, including the tobacco industry in an Australian case and a gold mining company in El Salvador.)

The tide seems to be turning. Governments that happily used the ISDS instrument in the past to protect their investors and investments abroad, now face ISDS claims of their own. Germany, for instance, is now being sued for preventing investments in atomic energy.

Proponents of the ISDS system argue that so far governments have defeated about 40% of the cases brought against them, and present such statistics as proof of fairness of the system. It is important to remember though that only investors can put forth an ISDS claim and that dispute settlements are shrouded in secrecy even though they often have a direct impact on the public interest, especially in environmental and health matters.

To address these issues EU Trade Commission Cecilia Malmström proposes a new version of ISDS, maintaining the right for governments to regulate in the public interest and excluding health and environmental issue from the ISDS scope.

Better Finance, the European Federation of Investors and Financial Services Users, stresses the fact that ISDS is mostly used by institutional investors, not individual investors who rarely have the resources to pay expensive private international arbitrators. Better Finance would rather see an ISDS of last resort. In the case of investor abuse, Better Finance believes local court systems are best placed to provide adequate redress. Even when investors are denied access to the local judicial system, a state-to-state dispute settlement system that can address the investment barrier would be preferable to ISDS.

Better Finance will agree to the use of ISDS when, and only when, a state-to-state dispute settlement system does not lead to adequate redress. In this case the ISDS mechanism as currently stipulated in TTIP would still need to be significantly amended to address crucial issues of transparency. ISDS would also need to be available to all parties including States and domestic individual investors.

A situation where investors would have the choice between different courts or jurisdictions in order for them to pick out the one most favorable to their particular case must be avoided at all cost.

As the BBC documentary illustrates, the inclusion of one or another version of ISDS in the TTIP agreement would have important implications with regards to democratic principles and the concept of sovereignty. However, investors themselves, according to some, seem to attach fairly little importance to ISDS provisions when making investment decisions.  So is it all but a storm in a teacup?

What's next?

A deal is unlikely before the end of 2016. The next key date is a meeting between Malmström and Froman in September 2015, prior to round 11 in October 2015.

Read more




In the macho world of asset management, a particularly apt term –alpha - has come to represent the degree by which returns on investments outperform the “market”, as measured against a suitable index.

“Active” funds typically seek to generate alpha. Embarrassingly though, for all those alpha males, traditional funds have revealed persistent negative alpha on average, bar a few negligible exceptions. Index funds that match the market by simply holding all the stocks are outperforming the active managers and do so at a much lower cost. Research increasingly demonstrates that with high fees and scarce talent, it is virtually impossible for active managers as a whole to outperform indexing in the long-term.

Over the years the findings from different comprehensive research studies into the performance of the asset management industry have been at the origin of financial news headlines announcing the end of the asset management industry as we know it. After all, why would an investor pay exorbitant fees for a glorified gambler to underperform the market?

The continued market shift away from actively managed assets towards indexed products seems to be a trend that is bound to continue into the foreseeable future. Fund managers are turning to other tactics to justify the high fees.

Whereas some did turn to indexing, they refused to relinquish their high fees and resorted to underhand practices such as “index hugging”, allowing them to limit the risk of underperformance by clinging to the index. Obviously these “closet index huggers” do not advertise the fact that, for all intents and purposes, they are charging “active management” fees for what is essentially passive management.

Better Finance and its members have been highlighting the issue for a while now and called on the European Securities and Markets Authority (ESMA) to examine the closet-tracking phenomenon more closely. Returns on investment in Europe suffer from excessive fees and high investment costs. Falsely active funds are partly to blame for this trend that is harming retail investors. European regulators should take a serious look at this potential large scale abuse.

“Smart Beta” to the rescue…

Smart, Strategic or Alternative Beta funds are essentially index funds with a twist in that, rather than relying on traditional market capitalization based indices, they use alternative weighting schemes based on measures such as volatility or dividends, amongst others.

There's nothing new about investing based on these different factors and some defend the practice by claiming that Smart Beta merely fills the gap between active and passive management. Others take less kindly to this new trend, which according to Bloomberg Intelligence now accounts for more than $400 billion - or 20 percent of all ETF assets - in the United States.

Zero Hedge labels the practice as “active management on autopilot”. Advocates of traditional indexing, such as Vanguard's Jack Bogle, definitely don't think highly of Smart Beta: “Smart Beta is stupid; there's no such thing. It's an idiotic phrase.” At the moment, While the jury is still out on the issue, “smart beta” is mostly marketed to institutions in any case, and not to individuals.

Read more




Infrastructure Investment Risks: The European Insurance and Occupational Pensions Authority (EIOPA) published a Consultation Paper on its Advise to the European Commission (EC) on the identification and calibration of infrastructure investment risk categories.

Deadline 09.08.2015

Derivatives / EMIR:  Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories

The European Commission is mandated to conduct a review of Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) in accordance with Article 85(1) thereof. The purpose of the consultation is to obtain feedback from stakeholders on their experiences in the implementation of EMIR to date.

Deadline: 13.08.2015

PRIIPs: EBA, EIOPA, and ESMA (the ESAs) welcome comments on the Technical Discussion Paper on Risk, Performance Scenarios and Cost Disclosures in Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs).

The discussion paper is available on the websites of the three ESAs. Comments on this discussion paper can be sent using the response form, via the ESMA website.

Deadline: 17.08.2015

Corporate Tax Transparency: As part of its ongoing effort to fight corporate tax avoidance, the European Commission recently launched a public consultation on corporate tax transparency in the EU. The consultation aims to find out if requiring companies to disclose additional information about the taxes they pay could help the EU to tackle tax avoidance and aggressive tax planning. In particular, it will examine whether companies should be required to disclose the taxes they pay in every country in which they operate.

Deadline: 09.09.2015

PEPP: EIOPA Consultation on the creation of a standardised Pan-European Personal Pension product (PEPP). See article above.

Deadline: 05.10.2015

Long Term Finance: Possible impact of the CRR and CRD IV on bank financing of the economy

The public consultation will enable the European Commission to obtain stakeholders' views and evidence on the potential impact of Capital Requirements Regulation (CRR) and Directive (CRD IV) on bank lending to the economy.

Deadline: 07.10.2015

ELTIFs: ESMA Consultation on draft regulatory technical standards under the ELTIF (European Long Term Investment Fund) Regulation.

ELTIFs are designed to facilitate investment into long-term asset classes requiring a long-term commitment from investors.

Deadline: 14.10.2015

Private Pensions Regulation: The OECD is making the draft Core Principles of Private Pension Regulation available for public comment until 20 October 2015.

A key issue is to facilitate the application of the Core Principles to different types of private pension plans, especially personal and defined contribution plans, which are growing in importance in pension provision in many countries. The update also aims to provide operative guidance on how to implement private pension provision effectively and efficiently while addressing the lessons learnt from the turmoil financial markets experienced over the past few years.

Deadline: 20.10.2015




The outlook for European citizens saving money for their pensions remains far from encouraging. Low interest rates combined with heavy fees render pension savings extremely vulnerable to even the slightest increase in inflation.

The next edition of a report by Better Finance on the gloomy status of private pensions in Europe will be released after summer.  The report will cover the situation in 15 countries representing over 80% of the entire EU Population: Belgium, Bulgaria, Denmark, Estonia, France, Germany, Italy, Latvia, Poland, Romania, Slovak Republic, Spain, Sweden, The Netherlands and the UK.

2014 Press Release:  Beware!   Saving   for   your   pensions   may   be   losing    you money.




07/07/2015 - Press Release - European Parliament once again ignores individual shareholders rights

29/06/2015 - Open Letter - Savers and individual investors should be at the heart of the upcoming CMU Action Plan

16/06/2015Consultation - Better Finance response to ESMA Consultation on Draft guidelines on complex debt instruments and structured deposits

08/06/2015 - Press Release - An early blow to the CMU initiative?

20/05/2015 - Press release - Commissioner Hill: “Effective consumer and investor: protection will need to be at the heart of the CMU”

13/05/2015Consultation - Better Finance Response to the Prospectus Consultation

13/05/2015Consultation - “An EU framework for simple, transparent and standardized securitisation”

13/05/2015Consultation - Better Finance Response to the European Commission Consultation “Building a Capital Markets Union”

06/05/2015 - Press Release – Return Capital Markets to their natural participants

06/05/2015 - Briefing Paper - "An EU Capital Market Union for Growth, Jobs and Citizens"




09.07.2015 - Le Parlement européen demande plus de transparence aux investisseurs institutionnels -

29.06.2015 - Swedish Shareholders' Association in the Financial Times: Carl Rosén interview in FTfm's "Face to Face" -

15.06.2015 - FTfm: Closet indexers doubled in the UK -

01.06.2015 - "Assurance-vie" under fire in France -

15.05.2015 - Capital Markets Union (CMU) - Think Tanks taking positions -

15.04.2015 - An even bigger hole for French pension fund Corem -

13.04.2015 - Transaction cost debate hots up -

03.04.2015 - Guillaume Prache on Aviva and "the world's most foolish financial products" -

02.04.2015 - Reuters: Better Finance quoted on "index huggers" -




Democracy International, ALTER-EU, Corporate Europe Observatory and other civil society organisations have persistently been reporting on the new rules that entered into force in November 2014 stipulating that lobby meetings involving European Commission officials must be reported. The new rules are aimed at improving the transparency of EU decision making. To this end, the Commission adopted a decision to publish all meetings of its Vice-Presidents, Commissioners, their cabinets and the Directors-General with lobbyists and interest representatives.

However, an analysis of the data by ALTER-EU with the help of Transparency International's new online tool,, shows that “lobbyists representing businesses and trade associations continue to dominate the lobbying scene in Brussels, making up 75% of all high-level meetings and more than 80% in certain areas such as financial regulation or the internal market”. Furthermore the findings suggest that already a few months into the new commission's term, there seems to be an increasing occurrence of under-reporting of lobby meetings.

The civil society organisations call on the European Commission to take measures to ensure a more balanced representation of stakeholders in these meetings and ensure the ban on meeting unregistered lobbyists is enforced on all levels.

Eager to fight alongside these organisations is Sven Giegold, Green MEP and the rapporteur of the “Report on Transparency, Integrity and Accountability”. He has teamed up with Democracy International calling stakeholders to fill out a questionnaire as part of a new campaign called “One against 30,000” and rate proposals put forward by the aforementioned organisations in order to tackle excessive lobbying.

On August 25th suggestions will be handed over to Sven Giegold in a bid to be included in his report on the issue. On September 3rd, Giegold will present its conclusions at the conference “Transparent, clean, accountable: Lessons from international best practice for the EU institutions”, taking place at the European Parliament in Brussels.  High-level experts and politicians will sit alongside citizens and civil society to discuss how the “seemingly hopeless struggle” can be won.

Read more

  • Who is meeting whom? The lobby meetings of the new European Commission; ALTER-EU
  • ONE AGAINST 30,000
  • Invitation: “Transparent, clean, accountable: Lessons from international best practice for the EU institutions” on 3 September in Brussels