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Financial inclusion, education and consumer protection: a trilogy Moscow, June 13-14 2013


Financial inclusion, education and consumer protection: a trilogy Moscow, June 13-14 2013 Andr Laboul Chair of the International Network on Financial Education – PowerPoint PPT presentation

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Title: Financial inclusion, education and consumer protection: a trilogy Moscow, June 13-14 2013

Financial inclusion, education and consumer
protection a trilogy Moscow, June 13-14 2013
  • André Laboul
  • Chair of the International Network on Financial
  • Head of OECD Financial Affairs Division

  • International trends (risks, access,
    sophistication, transfers)
  • Call for a new policy approach , a new culture
    with a new focus on the consumers and related new
    policy tools financial education, access and
    consumer protection
  • Information but not sufficient need education
  • Situation worrying (low level, overestimation,
    take time)
  • Solutions encouraging
  • Call for financial education to improve financial
    literacy (defined as a combination of financial
    awareness, knowledge, skills, attitude and
    behaviours necessary to make sound financial
    decisions and ultimately achieve financial
  • Let me first elaborate on this financial
    education pillar

  • Broader impact (increase confidence, efficient
    markets, social impact)
  • Role for all stakeholders (win win for the
  • Momentum due to the crisis (teachable moment)
  • OECD/INFE programme (with major support from the
    Russia Trust Fund)

  • International Network for Financial Education
  • Representatives from public institutions
    (ministries of finance, central banks, financial
    and other authorities, etc) from more than 100
    countries, including all G20 members and most
    APEC members Global/worlwide Network
  • Subgroups measurement of financial literacy,
    evaluation of FE programmes, financial education
    at school, national strategies, financial
    inclusion, financial education and women,
    investor education
  • Advisory Board

OECD and INFE priority areas
OECD and INFE instruments
  • INFE(2011) High-level Principles for the
    Evaluation of Financial Education Programmes
  • INFE (2010) - Guide to Evaluating Financial
    Education Programmes
  • INFE(2010) - Detailed Guide to Evaluating
    Financial Education Programmes
  • INFE(2012) Financial Literacy Measurement
    Questions and Socio- Demographics
  • INFE(2011)- Supplementary Questions
  • The methodological Work developed in complement
    to World Bank activities
  • OECD (2005) - Principles and Good practices on
    Financial Education and Awareness
  • OECD (2008) - Good Practices for Financial
    Education relating to Private Pensions
  • OECD(2008) - Good Practices for Enhanced Risk
    Awareness and Education on Insurance issues
  • OECD (2009) - Good Practices on Financial
    Education and Awareness relating to Credit
  • OECD(2012) draft Guidelines for Financial
    Education in Schools
  • OECD/INFE (2012 High level principles on national
    strategies for financial education
  • OECD/INFE (2013) policy guidance for addressing
    womens and girls needs for financial education
    and awareness

National strategies for financial education
  • National strategies play a crucial role in
    promoting efficient financial education policies.
  • They allow for strong engagement of all relevant
    stakeholders under a key leadership
  • They will allow for rationalization and
    coordination of existing programmes, with a
    better and more efficient allocation of resource.
  • Implemented in a lot of countries
  • OECD/INFE High Level Principles on national
    Strategies for Financial Education endorsed by
    G20 Leaders in 2012

Definition of national strategy
  • A national strategy for financial education (NS)
    is defined as a nationally coordinated approach
    to financial education that consists of an
    adapted framework or programme, which
  • Recognises the importance of financial education
    and defines its meaning and scope at the national
    level in relation to identified national needs
    and gaps
  • Involves the cooperation of different
    stakeholders as well as the identification of a
    national leader or coordinating body/council
  • Establishes a roadmap to achieve specific and
    predetermined objectives within a set period of
    time and,
  • Provides guidance to be applied by individual
    programmes in order to efficiently and
    appropriately contribute to the NS .

Main axis
  • General framework and scope
  • Wider approach
  • Adapted to national circumstances
  • Preparation
  • Mapping existing initiatives which allows for
    identifying partners, practices and gaps
  • Assessment of the needs of the populations (see
  • Consultation
  • Awareness and communication

Main axis
  • III. Governance
  • Leadership
  • Coordination mechanisms
  • Main stakeholders roles depending on their
    expertise public authorities, private sector,
    other stakeholders
  • survey

Main axis
  • Roadmap
  • Define vision and measurable objectives
  • Set main policy priorities and target audiences
  • Ensure overall impact assessment
  • Earmark resources
  • Implementation guidance
  • Efficient delivery methods (website but also
    others, behaviour, teachable moment)
  • Systematic evaluation of programmes

Selected challenges identified in the INFE survey
  • Agreeing on common objectives
  • Buy-in and commitment of key stakeholders
  • Getting all parties involved
  • Coordination and its sustainability
  • Lack of commitment from stakeholders
  • Excess of ownership from certain stakeholders
  • Long-term nature and lack of immediate visibility
  • Lack of resources/resource sustainability
  • Importance of differentiating between government
    general communication and financial education
  • Very good examples in G20 Russian Presidency/OECD
    publication on national strategies in G20

  • Financial education is necessary but not

Financial education is part of a trilogy approach
  • Other measures are needed
  • To overcome consumers myopia, passive behaviours
    and biases
  • To deal with fraud and miss-selling
  • To protect consumers against bankruptcies
  • To promote access
  • And to protect consumers rights
  • ? This calls for a trilogy approach

Financial consumer protection
  • OECD work
  • G20 high level principles on financial consumer
    protection endorsed at Cannes Summit
  • OECD active on FCP issues for over 30 years
    first recommendation in 1977
  • Top priority for OECD financial committees
    (Committee on Financial Markets (CMF) and
    Insurance and Private Pensions Committee)
  • Relevant work for other Committees Consumer
    Policy Committee (Consumer Policy Toolkit 2010)
    and Competition Committee Work developed by the
    G20/OECD Task Force on financial consumer
  • Developed by OECD Task Force on financial
    consumer protection , in cooperation with G20
    members, FSB and other international bodies and
    with public consultation . They cover
  • Legal, Regulatory and supervisory Framework
  • Role of Oversight Bodies
  • Equitable and Fair Treatment of Consumers
  • Disclosure and Transparency
  • Financial Education and Awareness
  • Responsible Business Conduct of Financial
    Services Providers and Intermediaries
  • Protection of Consumer Assets against fraud and
  • Protection of Consumer Data and Privacy
  • Complaints Handing and Redress
  • Competition

Legal, Regulatory and Supervisory Framework
  • While self responsible business conduct should be
    encouraged , there needs to be a strong
    regulatory and supervisory framework in place to
    protect consumers.
  • Financial consumer protection should be an
    integral part of the legal, regulatory and
    supervisory framework, and should reflect the
    diversity of national circumstances and global
    market and regulatory developments within the
    financial sector.
  • Strong and effective legal and judicial or
    supervisory mechanisms should exist to protect
    consumers from and sanction against financial
    frauds, abuses and errors.
  • Financial services providers and authorised
    agents should be appropriately regulated and/or
    supervised, with account taken of relevant
    service and sector specific approaches.
  • There should be oversight bodies (dedicated or
    not) explicitly responsible for financial
    consumer protection, with the necessary authority
    to fulfil their mandates

Improve information efficiency
  • Information is the first minimum step but not
     any  information.
  • Too much information kills information. Less is
    more. Who is protected?
  • G20/OECD Principles on financial consumer
  • Principle 4

Principle 4 of the G20/0ECD High Level Principles
on financial consumer protection
  • Financial services providers and authorised
    agents should provide consumers with key
    information that informs the consumer of the
    fundamental benefits, risks and terms of the
  • Financial services providers and authorised
    agents should provide clear, concise, accurate,
    reliable, comparable, easily accessible, and
    timely written and oral information on the
    financial products and services being offered,
    particularly on key features of the products and
    (where relevant) on possible alternative services
    or products, including simpler ones, they
    provide. In principle, information should include
    prices, costs, penalties, surrender charges,
    risks and termination modalities.
  • .

Improving disclosure efficiency
  • For instance use of plain language should be
    first tested with a control group (OECD
    Recommendation ).
  • Providers should provide information on conflicts
    of interest associated with the authorised agent
    through which the product is sold.
  • Appropriate information should be provided at all
    stages of the relationship with the customer.
  • All financial promotional material should be
    accurate, honest, understandable and not
  • Standardised pre-contractual disclosure practices
    (e.g. forms) should be adopted where applicable
    and possible to allow comparisons between
    products and services of the same nature.

Improving disclosure efficiency
  • Specific disclosure mechanisms, including
    possible warnings, should be developed to provide
    information commensurate with complex and risky
    products and services.
  • Where possible consumer research should be
    conducted to help determine and improve the
    effectiveness of disclosure requirements.
  • The provision of advice should be as objective as
    possible and should in general be based on the
    consumers profile considering the complexity of
    the product, the risks associated with it as well
    as the customers financial objectives,
    knowledge, capabilities and experience.
  • TWO SIDE Consumers should be made aware of the
    importance of providing financial services
    providers with relevant, accurate and available
  • Staff (especially those who interact directly
    with customers) should be properly trained and
    qualified (G20 principles)

And this seems much needed
  • (CGAP/CONDUSEF survey in Mexico)
  • Shopper What does this term, TAC Total Annual
    Cost, mean?
  • Responses from financial institution staff
  • It is the Tax Administration Cost
  • Here we dont use the TAC
  • If the interest rate changes, the TAC helps you
    so the interest rate does not rise
  • It is prohibited to give this type of information
  • It is the total annual costs, but its already
    included in the interest rate
  • That means this interest is the lowest in the

Promote responsible business conduct
  • Role of providers in disclosing relevant
    information and promoting financial education is
  • Role in making the bridge between supply and
    demand, between information and understanding and
    checking the soundness of this bridge

G20/OECD High Level Principle 6
  • Financial services providers and authorised
    agents should have as an objective, to work in
    the best interest of their customers and be
    responsible for upholding financial consumer
    protection. Financial services providers should
    also be responsible and accountable for the
    actions of their authorised agents.
  • Depending on the nature of the transaction and
    based on information primarily provided by
    customers financial services providers should
    assess the related financial capabilities,
    situation and needs of their customers before
    agreeing to provide them with a product, advice
    or service.. Where the potential for conflicts
    of interest arise, financial services providers
    and authorised agents should endeavour to avoid
    such conflicts. When such conflicts cannot be
    avoided, financial services providers and
    authorised agents should ensure proper
    disclosure, have in place internal mechanisms to
    manage such conflicts, or decline to provide the
    product, advice or service.
  • The remuneration structure for staff of both
    financial services providers and authorised
    agents should be designed to encourage
    responsible business conduct, fair treatment of
    consumers and to avoid conflicts of interest.
    The remuneration structure should be disclosed to
    customers where appropriate, such as when
    potential conflicts of interest cannot be managed
    or avoided.

  • Information is thus a very good example of
    interrelationship between financial education and
    financial consumer protection
  • Need information with strict disclosure rules
    (protection) but which has to be understood
  • Need responsible business conduct bridge between
    information and literacy

Complaints Handling and Redress Principle 9
  • Jurisdictions should ensure that consumers have
    access to adequate complaints handling and
    redress mechanisms that are accessible,
    affordable, independent, fair, accountable,
    timely and efficient.
  • Such mechanisms should not impose unreasonable
    cost, delays or burdens on consumers. In
    accordance with the above, financial services
    providers and authorised agents should have in
    place mechanisms for complaint handling and
  • Recourse to an independent redress process should
    be available to address complaints that are not
    efficiently resolved via the financial services
    providers and authorised agents internal dispute
    resolution mechanisms. At a minimum, aggregate
    information with respect to complaints and their
    resolutions should be made public.
  • Powerful tool for regulators/supervisors to
    assess problems
  • Importance to communicate on rights to complaint

Access is essential
  • What is the relevance to be educated and
    protected if you do not have access?
  • No relevance to have information, disclosure,
    education if no or limited or inadequate access
  • Need access to take decision
  • Special needs for vulnerable groups

But again
  • The three approaches access, education and
    protection are all necessary but not sufficient
    when taken alone.
  • Access is not sufficient if you are not able to
    take adequate decision and being literate does
    not protect you against frauds
  • We need the  trilogy 
  • Which itself is part of a  multilogy  together
    with prudential regulation, governance,

  • more information at
  • and