EU toughens up protection for investors
Account holders in the European Union who are faced with a run on their bank would get their money back within a week under a draft EU law published yesterday to protect consumers in the wake of the global crisis.
The European Commission’s proposals are intended to restore investor confidence, shattered by the worst financial crisis since the 1930s, during which household savings were whittled away and governments were forced to shore up banks.
“We don’t want to await a new Madoff case in Europe to better protect investors,” said EU internal market commissioner Michel Barnier.
He added: “We are not talking about offsetting the risk of the investment itself but we want to protect them against fraud, negligence and sometimes just mere incompetence on the part of those [to whom] they have entrusted their money.”
Some of the changes proposed by Barnier seek to plug the sorts of gaps highlighted by Wall Street fraudster Bernard Madoff, who swindled investors out of billions of dollars through a worldwide scam that he ran for decades.
The proposals are part of wider EU efforts to introduce “brick by brick, week by week” all the reforms pledged by the Group of 20 countries, which includes the European Union, to learn from the financial crisis.
Highlighting the complexity of introducing such reforms across the 27-country bloc, one planned EU measure to centralise the supervision of banks, insurers and markets is deadlocked because of British opposition to giving the EU supervisory authorities powers over national regulators.
Barnier said talks on that measure were now in the “final straits” but that the new bodies must be credible and effective. “The new authorities will not replace the existing national structures,” he said.
Barnier proposed toughening EU rules that protect bank account holders and retail investors. He also opened a public consultation on improving how insurance policy holders are safeguarded.