FINANCIAL TIMES, page 2

By Neil Buckley in Strasbourg

EU states and financial services groups are failing to embrace the single market fully, the Commission said yesterday as it launched a campaign to sweep away remaining barriers to cross-border selling of insurance and banking products.

In a green paper, Mr Mario Monti, financial services commissioner, and Mrs Emma Bonino, consumer policy commissioner, said significant progress had been made in liberalising cross-border selling of financial services. More than 60 directives had been issued, but member states had not implemented all of them, and financial services groups were not always selling products internationally when they could.

"We are sending a signal. The Commission is saying we think financial services, like other goods, should be arranged so that the single market benefits consumers," Mrs Bonino said. "This is an industry that has not completely taken on board the implications of the single market. There are major disparities between countries."

The paper targeted seven problem areas to be tackled:

Some companies were still refusing to sell financial services to consumers not resident in the state in which they were based. The Commission said it had received complaints from consumers that they were being refused insurance, or charged higher premiums, on the grounds that they came from certain EU countries, and so represented a higher risk.

Member states could still impose domestic rules which limited sales of certain types of products or services - for 'example, interest-bearing current accounts were still illegal in one member state.

Even where financial institutions were offering services such as mortgages or consumer credit on a cross-border basis, they sometimes failed to provide adequate information or customer service. Problems encountered included documents not being translated into the language of the consumer, or figures presented in a misleading way.

Unregulated financial intermediaries were taking "aggressive", and sometimes illegal, actions to sell banking and Investment products, which were causing "considerable distress or even hardship". Consumers seeking credit were offered apparently attractive conditions by brokers representing foreign institutions, but the information turned out to be poor.

Many consumers were complaining about the difficulty of enforcing cross-border contracts.

Lack of tax harmonisation made it difficult, for example, to deduct contributions to lifeassurance or mortgage repayments in another member state.

Motor insurance presented particular problems, with insurance of victims of an accident involving a vehicle from another member state but cawed by a local vehicle not covered by the current green card system.

The paper also warned that the rapid growth of electronic banking and financial services, by telephone or PC, could promote the single market, but presented special problems of regulation and consumer protection.

The Commission is Inviting comments by October IS, before drawing up policy proposals in a white paper. But consumer groups said it was not acting quickly enough to create a financial services single market, compared with progress In other sectors. There were "many concrete initiatives which should have been taken by now", said the Bureau Européen des Unions de Consommateurs, the European consumers' organisation.

"[The paper] seems to be rather passive in its approach, tending to wait for problems to arise rather than taking the initiative."