Today’s post is the second in our series, published in partnership with ING, looking at the future of banking services in Europe. The topic we’ll be covering today is the ease of banking across borders, which is (as some of our readers have pointed out) an important element in creating a more effective European Single Market.
This is also an issue currently under debate among EU policy makers, and this week the European Commission adopted a proposal for a Directive on bank accounts, focusing on the “transparency and comparability of bank account fees, bank account switching and access to a basic bank account“.
We kicked things off by taking some of your comments from our previous post in this series to Hans van der Noordaa, Chief Executive Officer (CEO) of ING Retail Banking in the Benelux countries (Belgium, the Netherlands and Luxembourg). First up, David sent us in a comment asking: “Is anybody having any difficulty setting up bank accounts in countries that they have had to move to get a job?”
This is a familiar complaint amongst our readers, but how would ING respond? Does Hans van der Noordaa agree that it is currently too difficult to set up a new account when moving to a new European country?
When opening a payment account a bank has to follow certain national legal procedures to identify a customer. These procedures unfortunately differ per country and I realize that this can sometimes be burdensome and confusing for European citizens, for instance when opening a bank account in a foreign country. We do our best to make things as easy as possible, but, regrettably, it is not that simple. I am afraid more European harmonization is needed, taking into account local circumstances and different banking models.
We also took David’s comment to Guido Ravoet, the Secretary General of the European Banking Federation, who disagreed that it was much more difficult (though he did admit that the process was perhaps a little bit more “cumbersome” because banks ask for extra details to check the identities of non-residents when opening an account).
Whilst this is an issue that affects many of our users on Debating Europe, Mr Ravoet made the important point that the banking sector in Europe is actually fairly fractured along national lines:
The consumer demand for financial services abroad is very low. A Commission study shows that, actually, 80% of consumers are not interested in buying financial services or opening an account outside of their home country. And only 5% really respond that they would consider eventually opening a bank account outside their home country. And for other services, like buying bonds, insurance, or investment funds or whatever, it’s less than 5%.
We also asked for the input of Dirk Haubrich, Head of Consumer Protection at the European Banking Authority. How would he respond to David’s comment?
I think that’s a very good question. I can sympathise with David’s experience; but I agree with him only to some extent. From my own experience, having lived in five different member states, I can confirm that there are certainly banks that refuse to let people open bank accounts if they don’t live in a country, but there are also banks that offer accounts specially designed for students, non-residents, expats and so on. So, it would be worthwhile for David and others to shop around in the country they want to move to, to compare what is available
It is generally true, though, that any refusal would have to be based on commercial reason. David does have a right to the same treatment as a national of the country he’s trying to open an account in. So, if he is refused an account, he can ask for a statement explaining the refusal, and if it’s not on commercial grounds but rather on grounds of nationality, then he can take a complaint to a Consumer Protection organisation, such as the European out-of-court complaints network for financial services (FIN-NET).
The Commission is aware of the issue and is in the process of proposing a long-term solution. As an EU authority, the EBA is bound by legislation and the mandate given to it by the Commission. The Commission consulted last year on access to basic bank accounts that firms will be required to grant, irrespective of whether a person is a resident of a country or not.
Next, we had a comment from Iuliun, who said he would like to see greater transparency around bank charges, so that it’s easier to compare costs in the rest of Europe. This is one of the issues that the Commission aims to address in its proposed directive. How would Hans van der Noordaa from ING respond to Iuliun’s comment?
I believe banks have a responsibility to be completely transparent about their fees. Only then a customer is able to easily compare fees from one bank to another. But I also think that it is even more crucial for a customer to understand what services are provided for the fees. For instance, your overall costs on an annual basis will depend on the way you want to use your account: e.g. it can make a difference if you make lots of transactions or if you use ATMs in various countries. This full comparison is not easy at the moment as hidden fees do still exist with some banks. Although banks have made progress, more efforts must be made to increase transparency.
We also wanted a reaction from somebody from the European Parliament, so we took Iuliun’s comment to Evelyne Gebhardt, a German MEP with the Social Democrats and a member of the Committee on the Internal Market and Consumer Protection. How would she respond?
Finally, how about getting the opinion of some actual consumers of banking services? Students, especially participants in the Erasmus programme, are some of the most mobile citizens in Europe. We contacted Emanuel Alfranseder, President of the Erasmus Student Network, and asked him to respond to Iuliun’s comment.
What do YOU think? Do we need better transparency and comparability of bank account fees in the EU? Should it be easier to open a new account or switch bank accounts in Europe? And should the process of identity checks for new bank accounts be harmonised across the EU? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts for their reactions.