UEF is launching an initiative which, we hope, will practically contribute to the better unification of the Bloc. It is our belief that unification should start at the level of the pragmatic and so, we intend to address separately and in a targeted way areas of possible disintegration. As one of our fields of expertise is financial regulation law, we are starting a project which, if successful, will provide EU retail investors with better financial education and skills that would allow them to make the most of the relevant to them EU financial legislation. At UEF, we believe that financial awareness and skills are not and should not be the preserve of the few; we believe that everyone could and indeed should obtain the minimum set of skills which would facilitate their safe and successful participation in the EU capital market, through local and cross border investments.
Admittedly, there has been a saturation of financial regulation following the 2008 financial crisis. The apparent purpose of this overregulation is to ensure that the EU will not face another heavy crisis like the one we just experienced, to stabilize the financial markets and the banks and to put in place guarantees that the rights of investors, including retail investors will be sufficiently well protected. Depending on whether the EU regulator actually achieves this goal, there will be a number of implications. They will concern not only the future financial, but also for the ongoing political stability of the Union.
We believe that the objective of maintaining a union which is not torn apart by disagreement and separatism depends to a great extent on the existence of a wealthy and satisfied citizenry. The last financial crisis showed us that financial insecurity, particularly when it is on such great scale, gives rise to discontent, separatist movements for breaking away from the Union (or for regions to break away from Member States) and even the creation and/or improved success of far right and racist parties. We believe that the objective of the EU Regulator to achieve a stable financial market where risk is managed from its inception or the objective of the National and Supra National supervisors to supervise and decrease the risk to the financial system, can be better achieved if regulation goes hand in hand with education of the end consumer. The end consumer of all legislation related to financial stability is, after all, the European Citizen whether this is a man/woman working in an office, in a bank, in a school or in agriculture. These are the people who will help to create greater stability by taking on some of the responsibility for the future development of the Union on their shoulders. For example, one of the objectives of the Capital Markets Union is to employ the so called “sleeping money” which remain in bank accounts and do not work for their owner.
Our European Union is struggling as its population is getting older. Thus, an increasingly greater number of people will require pensions in the near future, which will impose a real strain on the economies of EU Member States, to a different degree, depending on the wealth of each Member State and the ratio between people in working age and people in retirement. Equally, having pensioners and other retail investors embracing the ideals of the CMU without having proper financial education and without being informed about their rights and the protective mechanisms of the law (more specifically those created after the financial crisis), will mean that the aforementioned objectives will not be achieved. Quite the contrary, unwise investments may lead to losses that are difficult to offset for a retail consumer and may impose additional strain on the State budget in the form of welfare support for those who invested irresponsibly or without being well informed.
We believe therefore that by educating retail investors in the EU we can complement the legislative reform and make its objectives more achievable. The central idea of the UEF project is that the stability of the financial market requires not only regulation but also informed consumers. At this point, it is clear that retail investors lack sufficient knowledge of the main tools of the financial markets and awareness of the protection mechanisms available to them under the new legislation. We believe that this undermines the CMU’s objectives particularly, as well as the more general goal of financial stability.
To put our educational project in motion, we are planning to a create constant supply of blog posts and publish them on the allocated space on our website, addressing various consumer protection aspects of the most relevant to our project EU financial markets legislation, such as MiFID II and PSD II. We expect that the detailed information provided on the website will complement the Capital Markets App, which is now in the making. This app is intended to provide quick access to all information essential for retail investors. Stay tuned for updates and for follow up substantial educational posts.