February 28, 2021

Banks will face new demands by law to protect vulnerable customers | Markets

The latest regulation in financial matters does not come from the Ministry of Economy, but from the Ministry of Consumption. Alberto Garzón’s portfolio has approved a law to protect vulnerable clients, from various sectors, including banking, due to Covid-19. Industry sources believe that it will open a new crack around the Mifid 2 directive to accommodate social and not just economic criteria: sex, age, origin, if you belong to an ethnic minority or if you are a migrant, among other factors . The bank will face new demands.

The anti-Covid social shield was designed from the beginning with the moratoriums on loans and mortgages –that have been extended until March– as well as with the ban on rental evictions until the end of the state of alarm on May 9. But the Ministry of Consumer Affairs goes one step further.

In his defense of the royal decree law before Congress, Garzón pointed out that the new norm “protects consumers who live in rural areas without access to financial entities.” The decree it was validated on February 4 in Parliament, although it will also be processed as a bill through the emergency procedure.

This norm will be the key vault to elaborate a more profuse regulation that allows the development of the “protection regulations” when filing claims or the information that must be provided on certain products against Covid-19, among other issues.

The standard is the first step of future developments in the financial area

The regulation points the finger at the European Commission and its consumer agenda of November 13 last year. The text notes that among the impacts of the coronavirus epidemic on consumers, “the exploitation of financial vulnerabilities that existed since before the pandemic have become more pressing.”

And here, “vulnerable” consumers are defined as natural persons who, individually or collectively, due to their characteristics, needs or personal, economic, educational or social circumstances, are (…) in a special situation of subordination, defenselessness or lack of protection.

“Thus, the concept of a situation of vulnerability is broadened by alluding now to the social character”, they point out in finReg 360. From the regulatory advice boutique they add in a note that “it is striking that the legislator understands that sex [mencionado explícitamente] it continues to be a cause of vulnerability in Spain and, if true, it would be sad news ”.

More fragmentation

In practice, a new type of retail customer is created for the financial sector

Financial sources indicate that this new regulation will represent a new thread in the regulatory web that Mifid 2 has created. The classification of clients, until now segmented into three types – retailers, professionals and eligible counterparties – will be fragmented again, with the new group of vulnerable retailers.

The regulation postpones future developments. “This is in line with the consideration of essential services, as we have seen since the first regulatory frameworks of the pandemic. We will have to be attentive to these possible developments “, they say in finReg 360.

The regulation of basic accounts in Spain dates from the end of 2017. This rule, which involves the transposition of a 2014 directive, has the mission of not leaving anyone out of a service that in practice is needed to live. Consumption regulations will raise the bar, according to the sources consulted, by being able to influence the financial products that the bank can offer based on the convenience tests, or suitability in case of advice.

Entities must take into account debts


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