Address by Director of Consumer Protection, Bernard Sheridan at a FinCoNet meeting in Amsterdam

22 April 2016 Speech

Protecting the interests of consumers of financial services – role of supervisory authorities

As Chair of FinCoNet, I would like to welcome you all to our meeting today.  I am delighted that so many members and observers could attend and also that a number of other authorities are attending to hear about FinCoNet and its important work.  I would also like to thank in particular the AFM for hosting this meeting.  The AFM is a very important member of FinCoNet and plays a key role not only in delivering consumer protection within the Netherlands but also in leading and influencing international developments in consumer protection. 

Today I would like to outline what protection of consumers of financial services means to me, the important role played by supervisory authorities in delivering on this, the role that FinCoNet plays in assisting supervisory authorities and finally the challenges and opportunities we face as an organisation in delivering on our mandate.

Protecting the best interests of consumers

In Ireland, the Central Bank of Ireland regulates almost all financial services providers. This includes prudential supervision of firms and markets as well as consumer and investor protection.    The importance of the Central Bank’s consumer protection role is highlighted in our mission statement of Safeguarding Stability - Protecting Consumers.  We see consumer protection as underpinning everything we do - not just in the consumer area of the organisation but right across all areas including prudential supervision and financial stability.  Our consumer protection role is directly linked to our regulation of firms and markets.  The delivery of our consumer protection mandate is not separate or distinct from this wider regulatory function.

Importantly, the Central Bank has a statutory objective of effective regulation of financial service providers and markets, while ensuring that the best interests of consumers are protected.  This puts consumer protection in Ireland in a very fortunate position of having the protection of the best interests of consumers enshrined into law as I know in other jurisdictions there is not the same legal backing for such a mandate.  More on this later when I explore the role of supervisory authorities in delivering best practice in consumer protection.

I would like to explore further the concept of protecting the best interests of consumers. At a recent meeting in the Central Bank an external party challenged me as to the conflict, in their opinion, between firms delivering maximum returns for their shareholders and acting in their customers' best interests.  My response was that I would be disappointed if that was the view of any regulated firm in Ireland considering the focus there has been on consumer protection.  How can any regulated firm argue that in trying to maximise profits for their shareholders they would do so without seeing that the best way to achieve a long-term sustainable business model is when acting in their customers’ best interests is at its centre.  In short what is good for the customer is good for the business.   This does not mean that firms cannot charge a reasonable price for their services, target a particular cohort of customers or deliver shareholder returns.

So, what does consumers’ best interests mean then?  If you look up “best interests” in the dictionary, it is defined as to “act so as to benefit somebody”.  Wikipedia refers to it in the context of evaluating and balancing all elements necessary to make a decision in a specific situation for a specific person.  It goes on to say that it incorporates the need to gather all facts and assess the impact of any action, measure or decision on the person’s future with the central perspective being that of the person.  There is much merit and some key concepts of importance for how firms should be treating consumers of financial services.  These concepts include firms having the central perspective of that of their customers and working to their benefit so that they are better off.

How do we approach “best interests” in Ireland?

In my view the consideration of consumers’ best interests needs to be assessed and addressed on an ongoing basis.  The Central Bank publishes an annual Consumer Protection Outlook Report (CPOR) which is an integral part of our wider Strategic Plan.  The CPOR enables us to set out in more detail our consumer protection objectives, current and emerging risks to those objectives as well as a number of key themes we will be focusing on to address those risks.  The Central Bank’s consumer protection objectives are based on the need to ensure that consumers are treated fairly and with respect and dignity by firms, and that firms they act in their consumers’ best interests in all that they do.  Our consumer protection strategy is delivered in the context of our consumer protection mission of “Getting it right for consumers”.  Working to ensure consumers’ best interests are protected is a high bar to set.  However I don’t believe we should make any apologies for that, it is what consumers should expect and have delivered by both firms and their supervisory authorities.  For me it encapsulates a range of features including:

  • Consumer focused outcomes – is the consumer the central perspective and is the best outcome being delivered for each consumer?
  • Embedding a culture within firms from the top down which drives the right behaviours
  • Listening to customers – being open to feedback and acting upon it
  • Delivering a service which is transparent and reliable and which meets the needs of customers
  • Fixing things when they go wrong in a way that demonstrates the firm values the customer relationship
  • Being transparent and clear in a way that consumers can understand
  • Firms proactively assessing the risks they pose to their customers in the context of their business models and strategies and dealing with those risks in a comprehensive way.

What are we as supervisory authorities protecting consumers from?  As prudential supervisors we want to prevent a disorderly failure of firms which result in loss to consumers.  Risks to consumers can also arise from the products and services they consume, from the behaviour of firms and the people who run them and work within them as well as from wider developments in the market e.g. new entrants, new business models and innovation or where firms withdraw from the market. Advancing consumers’ best interests is a very challenging task and one which, in many respects, is perhaps now only getting the attention at an international level it deserves.  During the financial crisis and immediate aftermath the focus was quite rightly on repairing the financial soundness of the system and restoring financial stability.  The G20/OECD Task Force on Consumer Protection has played an important role in progressing the consumer agenda.  However I believe that we, as supervisory authorities with responsibility for consumer protection, have a responsibility to build on the progress made since the crisis and to ensure that the best interests of consumers becomes an integral part of how the financial system and the firms which operate in it functions. 

What role can Supervisory Authorities play?

I am sure you are all familiar with the G20/OECD High Level Principles on Consumer Protection.  The high-level principles are designed to assist G20 countries and other interested economies enhance financial consumer protection and provide a very sound framework within which to consider how consumer protection can and should be delivered.    Supervisory authorities play a very important role within this framework including as a key driver and influencer of the behaviour of regulated firms, inputting into ensuring the framework itself is fit for purpose as well as deciding who is authorised to provide services.

The foreword to the principles is very compelling.  It calls for legal recognition of financial consumer protection, oversight bodies with the necessary authority and resources to carry out their mission, fair treatment, proper disclosure, improved financial education, responsible business conduct by financial services providers and authorised agents, objective and adequate advice, protection of assets and data including from fraud and abuse, competitive frameworks, adequate complaints handling and redress mechanisms and policies which address, when relevant, sectoral and international specificities, technological developments and special needs of vulnerable groups.

High level Principle 2 focusses on the role of oversight bodies.  “There should be oversight bodies (dedicated or not) explicitly responsible for financial consumer protection, with the necessary authority to fulfill their mandates. They require clear and objectively defined responsibilities and appropriate governance; operational independence; accountability for their activities; adequate powers; resources and capabilities; defined and transparent enforcement framework and clear and consistent regulatory processes. Oversight bodies should observe high professional standards, including appropriate standards of confidentiality of consumer and proprietary information and the avoidance of conflicts of interest. Co-operation with other financial services oversight authorities and between authorities or departments in charge of sectoral issues should be promoted. A level playing field across financial services should be encouraged as appropriate. International co-operation between oversight bodies should also be encouraged, while specific attention should be considered for consumer protection issues arising from international transactions and cross-border marketing and sales.”

In Ireland the Central Bank delivers on our consumer protection legislative mandate under three broad functional areas i.e. gatekeeper, policy maker/influencer and supervisor/enforcer.   As Gatekeeper we assess applications from all retail firms seeking to enter the market.  All firms must satisfy the Central Bank that their senior people meet fitness and probity standards and that all staff dealing with consumers meet minimum competency standards.  In terms of policy making we operate in both a national and European context.  We have had a comprehensive consumer protection framework in place since 2006 underpinned by our Consumer Protection Code.  However most of the consumer policy initiatives are now taking place at a European level and our focus has shifted to influencing developments particularly at the European Supervisory Authorities.  We also undertake consumer research and monitor market trends for emerging issues.  Our supervisory priorities are focusing on driving a positive cultural change and developing a model to assess how firms are managing consumer risks, as well as monitoring all retail sectors for compliance with the rules and standards and taking appropriate actions where necessary including formal enforcement actions and redress for consumers and in the more egregious cases, revocation of authorization.

The challenges in delivering on our mandate are many.  Defining and measuring the outcomes we are trying to achieve is difficult.  Unlike many prudential standards e.g. minimum capital requirements, which are more tangible, consumer outcomes can often be less obvious and are dependent on the impact of the firm on their customers.  We are challenged by the expectations of the role of supervisory authorities which can, at times, not match the actual authority and responsibilities.  For example in a market where the cost of financial services is increasing supervisory authorities can be “blamed” for not intervening on behalf of consumers to bring down prices.  Resources are also limited – the needs are infinite and yet our resources are finite - and therefore the need to prioritise on the key issues is important.  However it is difficult to identify emerging risks and commit to addressing them alongside current market risks which need to be dealt with also.  In the interests of continuous improvement of our supervisory approach, we challenge ourselves on an ongoing basis as to whether we are doing the right things in the right way to address the right risks for consumers or whether there is a more effective way of delivering on our mandate.  Under our central bank legislation, the Central Bank of Ireland is required to have a peer review of our performance of our regulatory functions undertaken every four years.  Just last year we published the results of the first of these reviews which the AFM undertook for us.  This has been a very useful exercise which we benefitted much from.  This brings me to FinCoNet and its role and potential that it offers to us all as we seek to effectively deliver on our consumer protection agenda.


The importance of financial consumer protection authorities reaching out and engaging with other authorities was first identified and acted upon by the Financial Consumer Agency of Canada back in the early 2000s.  An informal network of a small number of bodies met on an annual basis to share experiences and to learn from each other.  However at the time of the financial crisis the priority of many authorities focused on the soundness and stability of their banking systems and the informal network went into abeyance.  However in recognition of the importance of the role of consumer protection authorities in the wider context, renewed interest in the establishment of a dedicated international body re-emerged.

In 2013, FinCoNet was formally established at our meeting in Lisbon hosted by the Bank of Portugal as an international organisation of supervisory authorities with responsibility for financial consumer protection.  It is a member based organisation set up as a not-for-profit association under French law. The mission of FinCoNet is to promote sound market conduct and strong consumer protection through efficient and effective financial market conduct supervision with an initial focus on banking and credit consumer issues. It seeks to enhance the protection of consumers and strengthen consumer confidence by promoting robust and effective supervisory standards and practices and by the sharing of best practices among supervisors.  It also seeks to promote fair and transparent market practices and clear disclosure to consumers of financial services.

So two and a half years later how have we done?  Overall it is fair to say we have delivered a lot in a number of areas but have also significant work still to do in others.  We now have 18 members (due to increase to 19 shortly) and 6 observers with representation from around the world.  From a governance perspective, the organisation has been established on a sound footing both legally and financially with a strong, experienced secretariat.  Our relationship with the OECD has enabled us to benefit from their international experience.  We have progressed our consumer protection work including the publication of our initial report in July 2014 on Responsible Lending, and a report on Sales Incentives and Responsible Lending published in January 2016.  The development of a database on supervisory tools is nearing completion and the work on on-line and mobile payments is continuing – (we will shortly hear from the Chairs of the Standing Committees on progress).  A forum for exchange of information has been established through our website and Clearspace and the FinCoNet newsletters continue to be a useful tool for highlighting current issues in different jurisdictions.  For me one of the biggest benefits in being a member of FinCoNet is being able to tap into the information and current and emerging risks through the relationships and network we have established.  

Challenges for FinCoNet?

What more can be done?  There are many opportunities for us as we grow and develop, at all times ensuring that we remain focused on the needs of members.  The Governing Council is currently considering FinCoNet’s priorities over the next few years.

In the context of our mission and objectives it is important that FinCoNet continues to promote internationally the need for the protection of the interests of consumers of financial services. We have an opportunity and responsibility to learn from the past and to seek to embed consumer protection into every supervisory framework.  Our research and publications also help others understand what we are about.  We are beginning to see a greater interest in our work from other international organisations and this is to be welcomed and developed.

Developing our capacity to help members engage with each other, share best practices and learn from each other remains a priority for me.  Supervisory authorities are about taking action to prevent consumer detriment, to resolve and deal with current consumer issues and to anticipate and mitigate potential future risks to consumer protection.  We have a big responsibility to act in an effective and responsible way.

We also need to ensure that all supervisory authorities who are responsible for consumer protection are aware of the role of FinCoNet and are encouraged and facilitated in joining.  Sharing best practices can relate to relatively minor and specific issues as well as wider more strategic items.  I believe we can do more to enable supervisors within each member to engage more frequently and openly with other authorities by building up a network on specific issues.  FinCoNet can and should also be facilitating peer reviews and encouraging exchange of staff across members on short-term exchanges. 

I would set the following questions for all of us to challenge our input into and support for the development of FinCoNet.

  • How can FinCoNet help promote and support further the need for protecting the best interests of consumers among supervisory authorities?
  • How can FinCoNet support members in shaping a positive, consumer-focused culture in the firms which they supervise?
  • As members, are we supporting other members through contributing and sharing our own experiences and best practices through the newsletters and Clearspace?
  • Are we, as members, reaching out to other potential members to inform them of our work?

These questions hopefully will generate some discussion during our meeting later on this morning.


It remains an honour for me to be the Chair of FinCoNet through these early years of its existence.  I believe that my own experience and that of the Central Bank of Ireland has contributed in a positive way to FinCoNet and what it is trying to achieve.  Consumer protection is not easy, at times it can seem that little progress is being made when new issues emerge and the behaviour of regulated firms is not what it should be.  However FinCoNet offers a real opportunity for us all to really raise the standards across the world and to act as a support to one another in delivering on our domestic agendas.  I would encourage everyone to think about the challenges we face and to focus on the outcomes we are trying to achieve as we seek to enhance the protection of consumers and strengthen consumer confidence by promoting robust and effective supervisory standards and practices and by the sharing of best practices among supervisors and, together, getting it right for all our consumers.