After previously asking the banking sector to improve cross-border accessibility to basic bank accounts of its own accord, the European Commission this week released a proposal to force the industry to do just that.

The proposed directive comes after a 2011 recommendation for banks to self-regulate in improving access to basic payment accounts was largely ignored. Now the commission is looking to a more comprehensive (and legally binding) approach with its draft directive.

According to the commission, the goal is to ensure the single market works not just for industry but for consumers as well. While the single market legislation permits banks to operate throughout the European Union, consumers do not always receive the same cross-border benefits in terms of opening accounts in other member states or switching banks easily. The directive also calls for banks to provide more transparency and comparability for various fees charged.

“Today's proposal will finally give all European citizens access to a basic bank account and enable them to participate fully in the society they live in and take advantage of the benefits of the single market,” said Michel Barnier, commissioner for Internal Market and Services. “By making it easier to compare fees and change bank accounts, we also hope to see better offers from banks and lower costs. The proposal will also benefit the financial services industry by providing additional incentives to offer products cross-border and enter new markets.”

The draft directive has three main goals:

·         Comparability of payment account fees: making it easier for consumers to compare fees charged for payment accounts by banks and other payment service providers in the EU

·         Payment account switching: establishing a fast and easy method for consumers to switch their payment account from one bank or service provider to another

·         Access to payment accounts: allowing EU consumers who want to open a payment account to do so even if they are not residents of the country where the provider is located; allowing all EU consumers, regardless of their financial circumstances, to open a basic payment account to perform essential functions, such as receiving salary or paying bills

Among the specific requirements, service providers would be mandated to provide consumers with a fee information document listing common services and associated fees, a statement of fees charged within the previous 12 months, and a glossary of terms if requested by the consumer. Banks also would be required to use standard terminology for most common services. The directive calls on member states to create at least one independent website to collect the fee information from the banks and other service providers, making it easier for consumers to compare their options.

For account switching, banks would be required to handle all steps of such a transfer free of charge in either 15 or 30 days, depending on whether the providers are located in the same member country. Providers also would have to inform consumers of their rights to switch and instructions on how to switch.

On the access front, the directive aims to provide all consumers with options for a basic account regardless of where they live or their financial background. The commission cited a recent study showing 58 million EU consumers over the age 15 do not have a payment account. To this end, member states would be forced to ensure their residents have access to at least one service provider. However, the directive would not force all banks to serve consumers in all EU member states.

The commission argued the directive is “not overly prescriptive,” and takes into account differences between member states. The commission also maintained the directive could aid the industry by boosting competition.

“Our aim is that consumers are better informed about fees both before and after they open an account, and that they can change their provider rapidly and easily if they so wish,” said Tonio Borg, commissioner for Health and Consumer Policy. “This proposal will also favour competition in the retail financial services sector and reward businesses that offer consumers a better choice and price.”

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