The Autorité des Marchés Financiers (AMF- French Prudential
The Scientific Advisory Board chose ‘Financial education in the digital era’ as the theme of its annual conference, which was held on 20 June 2016 in partnership with Paris School of Economics.
The conference was opened by François Villeroy de Galhau, Governor of the Banque de France (France’s central bank). He stated that financial literacy “shall help everyone make informed decisions”. In this regard, financial literacy is a “factor for economic efficiency and social fairness”, which justifies involvement from public authorities- including, namely, the Banque de France. In partnership with both the Autorité de
Three roundtables followed. The first roundtable aimed at assessing financial literacy trends and their impact on the financial behaviour of consumers and investors in
Since this conference raises many crucial questions for Regulation, it is important to recall what has been said in the panel discussion on the role of Regulator with regards to financial education (I.) before sharing some thoughts on this matter of particular interest (II.).
I. The third roundtable: Financial education in the digital era: what challenges for Regulators?
The third roundtable was moderated by Bertrand de Juvigny, AMF’s General Secretary. He recalled that if financial education was a topic that has been of “serious concern to the AMF” for several years, the underlying Regulatory strategy now requires to be “revisited in a new context in which digital takes up stage and seizes power”.
It appears that two main lines of thought came out from the discussions: the speakers first reported how consumers and companies in the Fintech industry have been expressing new needs for Regulation lately (A.); then, they wondered whether Regulators themselves could undertake the investors’ financial education (B.).
A. New needs for Regulation stemming from an increasingly digitalised financial education
According to Agnès-Christine Tomas-Lacoste, Executive Director of the INC, the fact that consumers have to use new, digital financial services brings about renewed worries about cybersecurity: to her, there is a “genuine expectation among consumers on an increased regulatory protection from the Regulator”.
In this regards, Franck Guiader, who recently took the head of the newly created ‘Fintech,
Philippe Pelle, deputy head of unit at the European Commission, presented the results of the European Commission Green Paper on retail financial services in
Franck Guiader recalled the efforts made by the AMF to set an adapted regulation to crowdfunding companies, to the extent that the sector now benefits from “complete legal certainty”.
B. The possibility for the Regulator to undertake the consumers’ financial education
According to Franck Guiader, a “Regulatory to Business to Customer” approach should be fostered. In this view, financial education shall not be directly financed by the Regulator; nonetheless, the Regulator should educate the players, which will educate consumers in return.
The Regulator shall then educate the players, inter alia, by providing them with clear
During his concluding speech, President of the AMF Gérard Rameix underlined the AMF’s strong will to educate, as he stated that “these new technologies — as they allow financial institutions to know better their customers, as they ease comparison between products and as they optimize diversification — will somehow compensate the lack in financial education of the public”.
II. The opportunity to link Regulation and Education
Though financial education (often referred to as financial literacy in research papers) is not a recent concept, public authorities pay a greater attention to it since the financial crisis. Since 2010 indeed, various studies have shown that people usually did not have basic financial knowledge, and that this was likely to contribute to the fragility of the financial system.
The OECD defines financial literacy as “a capacity building process by which individuals, through
It seems that Regulation, as regards financial education, has a dual role: though the primary function of the financial Regulator is to protect an increasingly autonomous consumer (A.), he is now called on to adopt a more proactive approach towards performing savings that would meet political objectives (B.).
A. The Regulator, guaranteeing consumers’ protection by educating them
On the one hand, financial education’s object and effect is to increase the consumer’s autonomy. Financial Regulation takes part in those efforts to become self-reliant as it ensures that the consumer is provided with a transparent and high-quality
Incidentally, the Regulator’s vigilance as regards financial education also protects the market from the inherent risks arising from an increasing autonomy of the consumer. It appears indeed that such an autonomy is sometimes all the more exhilarated by ‘disruptive’ digital companies that place it at the heart of their strategy: this is especially true for the so-called ‘social finance’, which operates on virtual platforms and gives rise to the formation of virtual communities that are likely to influence individuals in their financial decision-making processes.
B. The Regulator, promoting the savers’ “effectiveness” by educating them
On the other hand, however, the fact that France now has a distinctive “national strategy” shows that the necessity to improve financial education exceeds the sole objective to protect consumers or savers.
In his introductive speech to the conference, the Governor of the Banque de France first introduced financial education as a “factor of efficiency for the financing of the economy”. This view takes us further away from the definition brought by the OECD, according to which the ultimate end to financial education is the individual wellbeing of each decision-making individual. Public authorities thus seem to consider that we should lean towards a “better” financial education of the savers, that should be designed and implemented by public authorities themselves, in partnership with independent regulatory agencies (such as the AMF or the ACPR), both for the benefit of the State itself (since a wider-spread preference among individuals for long-term savings may help implementing pension reforms) and for the real economy’s (since the diversification of the savers’ investment portfolio towards more equity shareholding may improve companies’ financing capacity). The individual wellbeing of the consumer is only considered as subsidiary.
Here is thus another salient example that Regulation law is teleological by nature; it is underpinned by political principles, and its primary feature is that it is designed to remind the market which objective it should aim to. In this view, the Regulator must draw on all available means: education is one of them.
More on financial education
Report of the focus group of the Comité consultatif du