8 Financial services: bank accounts
| (34942)
9788/13
+ ADDs 1-2
COM(13) 266
| Draft Directive on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features
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| Legal base | Article 114 TFEU; co-decision; QMV
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| Document originated | 8 May 2013
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| Deposited in Parliament | 24 May 2013
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| Department | Treasury
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| Basis of consideration | Minister's letter of 4 July 2013
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| Previous Committee Report | HC 83-v (2013-14), chapter 9 (12 June 2013)
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| Discussion in Council | Not known
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; further information requested
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Background and previous scrutiny
8.1 Our Report of 12 June 2013[33]
sets out the details of this proposal. The intention of the proposal
is, in sum, to ensure bank fees are transparent and comparable,
that consumers can switch bank accounts, and that all EU citizens
have access to a basic payment account.
8.2 When we last reported on the proposal, we
concluded that it served a predominantly single market objective
that was better achieved at EU level than national level, and
so was consistent with the principle of subsidiarity. The Government
had formed the opposite opinion, but provided little justification
for its conclusion. We therefore asked for a proper analysis of
its concerns.
Minister's letter of 4 July 2013
8.3 The Economic Secretary to the Treasury (Sajid
Javid) says that the Government considers that the provisions
of the Commission's proposal that relate to the mandating of basic
payment accounts do not comply with the principle of subsidiarity
because the objective sought could sufficiently be achieved by
action at Member State level; and the objective sought would be
better achieved by action at Member State level.
MEMBER STATE ACTION ON FINANCIAL INCLUSION
8.4 The Government agrees that access to a transactional
payment service accounts is key to enabling people to manage their
money on a day-to-day basis effectively, securely and confidently.
Moreover, the Government is committed to improving access to financial
services. To this end, the major UK banks voluntarily offer basic
bank accounts alongside their other retail current accounts.
8.5 The UK's basic bank account policy has been
successful in driving down the number of individuals without access
to such accounts within the UK. The Government is continuing to
work with UK industry on access to payment accounts ahead of the
introduction of Universal Credit and has noted the recommendations
of the Parliamentary Commission on Banking Standards regarding
UK basic bank accounts.
8.6 UK account providers already make no distinction
between UK residents and non-UK residents, and UK banks must comply
with anti-discrimination legislation. Not only has the UK been
able to take, and continues to take, action to address financial
inclusion but, as noted in the Commission's impact assessment,
other Member States have also taken action to address the objective
of increased financial inclusion within the EU. The Commission's
impact assessment notes that a legal framework exists to facilitate
access to basic account services in Belgium, France and Italy,
while partial regulatory or self-regulatory regimes are in place
in Portugal, Denmark, Estonia, Finland, Lithuania, Luxembourg,
Sweden, Germany, Hungary, Ireland, Netherlands, and the UK. Further
to this, as noted in a European Parliament report on basic banking
services, in Spain there are no residency requirements for access
to a basic payment account.[34]
8.7 The Government states that the Committee
is correct to note that the Commission cites an example of a law
on basic account services being prepared in Slovakia, which will
restrict the use of those services to Slovakia alone. However,
it notes that the report from the European Parliament cites an
internal survey by the Slovak Banking Federation which showed
that over 90% of banks within Slovakia allow the opening of an
account by non-resident consumers from other Member States.
8.8 The Minister says he hopes that the Committee
will recognise that this demonstrates that action to increase
financial inclusion for residents and non-residents can and already
has been taken forward across the EU at Member State level.
8.9 The Commission also cites in its impact assessment
that the reason to bring forward this legislative proposal is
the lack of progress in Member States implementing its July 2011
Recommendation on access to basic bank accounts. This Recommendation,
for basic accounts to become available at a reasonable charge
to consumers, regardless of their country of residence in the
EU or their financial situation had a deadline for implementation
of January 2012.
8.10 However, some Member States are still developing,
or have only recently concluded their development of, proposals
on access to basic payment accounts. For example, the Republic
of Ireland is piloting a basic bank account scheme and while the
pilot is not available to non-residents, it has been noted that
this is an issue that would be explored.[35]
Also, Portugal has developed a voluntary offering with six banks
to provide basic bank accounts this year.[36]
8.11 Therefore while some countries are yet to
take action before the Commission's recommendation deadline, there
is evidence of steps being taken to develop domestic proposals
that address issues around financial inclusion.
BETTER ACHIEVEMENT OF OBJECTIVE AT MEMBER STATE LEVEL
8.12 The Government agrees that the reasons why
individuals are unbanked can vary across the EU, as the Commission
sets out in their impact assessment. For example, research by
the Financial Inclusion Taskforce found that the reasons why people
in the UK are often unbanked can be due to the fear of using a
bank account, inability to meet the required identification requirements
or because they have a general mistrust of banks.[37]
The Government has taken action in the UK to help address these
issues by increasing financial capability, setting up the Money
Advice Service to provide free impartial financial advice. The
Department for Education is also consulting on changes to the
National Curriculum which would make teaching financial literacy
a statutory requirement.
8.13 There are also examples from other Member
States in the Commission's impact assessment. In Belgium, despite
a legal right to a bank account, the Commission cites a lack of
awareness and financial capability as being a reason why individuals
can still be unbanked. Conversely in Romania and Bulgaria the
Commission notes that the number of unbanked customers can be
attributed to consumers' preference for using cash. This is a
different issue to that faced in other Member States and it is
not clear that a legal right to a bank account would necessarily
help tackle consumer's preference for using cash. The Minister
also understands that in Poland, a Member State to which the Commission
have attributed a high unbanked rate in their impact assessment,
the problem arises because of a traditional preference for retired
individuals to receive their state pensions from the postal service
rather than through banks.
8.14 The Commission is of the view that the single
market is distorted because not every EU citizen has a bank account.
However, the issue of financial inclusion across the EU appears
often to be more country specific. The reason an individual might
be refused an account in a Member State is very rarely due to
cross-border issues.
8.15 It could therefore be argued that Member
States are best placed to promote financial inclusion and tackle
the reasons why individuals remain unbanked.
8.16 The Minister hopes that the Committee finds
this response helpful in considering whether the Commission's
proposal on basic bank accounts is consistent with the principle
of subsidiarity.
Conclusion
8.17 We thank the Minister for this more helpful
assessment of the Government's subsidiarity concerns, which has
assisted us in considering whether to recommend that the House
adopt a Reasoned Opinion.
8.18 The Government argues that, in essence,
access to a basic payment account is a local matter being addressed
locally, albeit to different extents, in many EU Member States.
8.19 We recognise this as a valid subsidiarity
argument, but, having reviewed the Commission's explanatory memorandum
and impact assessment again,[38]
we conclude that the Commission has sufficiently demonstrated
a justification for EU action that it is unlikely to be impeached
by the Court of Justice. Its reasoning is encapsulated in the
following paragraph in its explanatory memorandum:
"In particular, to date eleven Member States
have no measure in force concerning the right to open an account,
features of such an account and associated charges. Only a few
Member States appear to be close to complying with the principles
of the Recommendation. In the remaining Member States, some rules
or systems are in place or about to be put in place, although
with widely differing standards and degrees of implementation.
In some countries the measures in place do not amount to legislative
initiatives but are limited to self-regulatory actions, only impacting
those banks which voluntarily chose to adhere to the principles
in question. Their effectiveness is thus limited and the application
inconsistent. In other Member States, only generic and general
provisions with respect to access are in force whilst structured
measures in this respect are still lacking."[39]
8.20 Accordingly, we do not propose to recommend
that the House adopt a Reasoned Opinion on this proposal.
8.21 We look forward to being updated on developments
in the negotiations. The proposal remains under scrutiny in the
meantime.
33 See headnote. Back
34
http://www.europarl.europa.eu/document/activities/cont/201111/20111118ATT31909/20111118ATT31909EN.pdf Back
35
http://ec.europa.eu/consumers/consultations/docs/publ_auth-ie_centralbank_en.pdf Back
36
http://clientebancario.bportugal.pt/SiteCollectionDocuments/Basic%20Bank%20Accounts.pdf Back
37
http://webarchive.nationalarchives.gov.uk/20130129110402/http://www.hm-treasury.gov.uk/fin_consumer_fininclusion.htm Back
38
Particularly at section 3.2.1. Back
39
Second para on p.5. Back
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