Agefi Luxembourg - mars 2025

Mars 2025 11 AGEFI Luxembourg Banques / Assurances By Benjamin ACCADIA, EY Luxembourg Partner, Business Consulting Balancing Investor Protection, Innova- tion, and Competitiveness T he European Union’s Retail Investment Strategy (RIS) re- presents one of the most significant regulatory initia- tives in recent years, ai- ming to reshape Europe’s financial landscape and convert household savings into capital that drives in- novation and sustainable growth. Published by the European Com- mission on 24 May 2023 as part of the broader Capital Markets Union Action Plan (re- cently rebranded as the Savings and Investments Union Action Plan), the RIS seeks to address the historical gap in market engagement between European retail investors and their global coun- terparts while enhancing the competitiveness of EU financial markets. Current Landscape and Challenges European households have traditionally exhib- ited a conservative approach toward capital markets. While U.S. households allocate over 40% of their assets to equities, bonds, mutual funds, and other market-based instruments, only about 17% of EU household assets are in- vested in such instruments, according to Euro- stat. This conservative allocation stems from several factors, including difficulties accessing clear financial information, concerns regarding financial advice quality, and questions about costs and potential conflicts of interest. The complexity of financial products presents a significant barrier to increased retail partici- pation. Many investors struggle to access straightforward, comparable information nec- essary for making informed decisions. This sit- uation is compounded by complex fee structures and inducements that can compro- mise the objectivity of the advice process. In today’s digital environment, retail investors must navigate marketing messages that often emphasize returns while giving less promi- nence to risks. Additionally, the fee structures applied to retail investment products have been identified as a factor hindering broader market engagement. The Strategic Framework In May 2023, the European Commission intro- duced the RIS to address these challenges. The strategy aims to enhance investor protection while facilitating the channeling of retail savings into productive investments. The Commission’s approach recognizes the importance of creating an environment that supports both investor con- fidence and market development. Legislative Components Two principal legislative proposals form the foundation of the RIS: 1. Regulation Amending Packaged Re- tail and Insurance-Based Investment Products (PRIIPs): This proposal ad- dresses the current Key Information Doc- uments (KIDs) provided to retail investors. By standardizing and clarifying these disclosures, the regulation aims to make investment prod- ucts more accessible, helping investors better understand associated risks and costs 2. The Omnibus Directive: Covering several major areas of EU financial legisla- tion – includingMiFID, the In- surance Distribution Directive (IDD), the UCITS Directive, and the AIFMD – this directive seeks to harmonize standards across these frameworks, addressing regulatory fragmentation and updating rules to reflect cur- rent market realities Key Elements of the Strategy The strategy encompasses several critical ele- ments designed to support retail investor protec- tion and engagement: - Disclosure Requirements: Refining disclosure rules to ensure investors have access to relevant and comparable information - Cost Transparency: Increasing transparency and comparability of costs through standardized presentations and terminology - Marketing Standards: Establishing appropriate standards for financial intermediaries’ marketing communications - Financial Literacy: EncouragingMember States to implement measures that enhance citizens’ fi- nancial literacy - Professional Standards: Maintaining appropri- ate qualification requirements for financial advi- sors - Supervisory Coordination: Enhancing coordi- nation among supervisory authorities to support consistent implementation of rules across the EU Perspectives on the Legislative Approach and Contentious Issues As of early 2025, the RIS is progressing through the EU’s legislative process. The Parliament, Council, and Commission have all published their respective positions – diverging on several key areas, including value-for-money assess- ments, inducements, regulatory powers, and im- plementation timing – setting the stage for trilogue negotiations. The inducements ban has been particularly con- tentious. The Commission initially proposed re- strictions on inducements for execution-only services, but this has met with significant resist- ance. The new Financial Services Commissioner, Maria Luis Albuquerque, has indicated she will not continue to push for the inducements ban. Both Parliament and Council appear aligned on not implementing a ban, though differences re- main on the Council’s proposed new induce- ments test, which Parliament considers excessively complex. Value-for-money assessments and benchmark- ing have also been subjects of vigorous debate. Both Parliament and Council have re-categorized benchmarks as supervisory tools, though con- cerns persist about whether this could still lead to a form of price regulation, particularly given the Council’s proposal to make supervisory benchmarks public (whereas Parliament pro- poses non-public benchmarks). The European Securities and Markets Authority (ESMA) and the European Insurance and Occu- pational Pensions Authority (EIOPA) issued a joint letter expressing their concerns about the RIS, calling for simplification and highlighting the “substantial number of tasks and responsi- bilities” imposed on them. Their chairs, Verena Ross and Petra Hielkema respectively, have voiced concerns about the complexity and ad- ministrative burdens of the Parliament/Council RIS proposals. Industry concerns remain focused on value-for- money assessments, inducements, and the need for simplification, along with areas requiring sig- nificant technological upgrades like enhanced re- porting provisions. Several national competent authorities have also expressed concerns during public consultations. Germany’s BaFin has high- lighted that overlapping national rules often lead to uneven enforcement, while France’s AMF has pointed out that divergent interpretations of EU directives create barriers to market integration. Given the controversial elements in RIS, particu- larly around inducements and product gover- nance, and the broader drive to simplify the framework, the EU’s legislative process is ex- pected to be protracted. Considerations for European Financial Markets One of the most critical challenges facing EU fi- nancial regulation is balancing robust investor protection with the need to remain globally com- petitive. Overly stringent rules could potentially stifle innovation, reduce market liquidity, and deter investment in the European financial sec- tor. Industry stakeholders have voiced concerns that excessively restrictive measures may disad- vantage European firms compared to their inter- national counterparts. The broader political climate may also influence the development of RIS. There has been a politi- cal shift across several EUMember States, which has affected the composition of the newly elected EU Parliament and the governments contribut- ing to the Council. The European Commission’s recent Competi- tiveness Compass underscores that Europe’s competitive edge lies in a well calibrated regula- tory framework. According to the Compass, maintaining an environment that simultaneously balances investor protection with preserving the competitiveness of European markets is para- mount and should be a central aspect of EU fi- nancial regulation. By ensuring that retail investors are well-in- formed and protected, RIS has the potential to create a more stable investment environment, making European financial markets more attrac- tive to both domestic and international investors. However, the challenge remains to avoid exces- sive regulatory burdens that could hamper inno- vation or limit operational flexibility. Balancing Protection and Competitiveness The challenge for the RIS is to transform frag- mented retail savings into dynamic capital for in- novation and sustainable growth without imposing heavy compliance burdens. The key to success lies in striking a balance across several di- mensions: - Enhanced Transparency: Implementing clear, standardized disclosure requirements that de- mystify investment products - Cost Efficiency: Streamlining regulatory proce- dures to reduce compliance costs, making finan- cial products more affordable - Support for Innovation: Creating an environ- ment that protects investors while encouraging financial institutions to innovate and compete globally - Market Integration: Harmonizing national reg- ulatory practices to reduce fragmentation and fa- cilitate smoother cross-border investments - Responsive Governance: Adopting flexible reg- ulatory measures that can adjust to changing market conditions and geopolitical shifts Charting a Path Forward The EU Retail Investment Strategy is at a criti- cal juncture in its objective of creating a finan- cial ecosystem that is both investor-friendly and competitive. By simplifying regulatory re- quirements and harmonizing oversight across the EU, the RIS framework is positioned to un- lock private savings and transform them into dynamic capital. As Europe navigates this transformation amid ongoing geopolitical and economic challenges, the success of RIS will ultimately be measured by its ability to foster an integrated, resilient, and innovative financial market. This balanced approach not only protects retail investors but also ensures that European financial institu- tions remain agile in a rapidly evolving global landscape. If successfully implemented, the reformed RIS will serve as a catalyst for long-term economic growth, reinforcing Europe’s strategic autonomy and cementing its position as a global financial leader. The ultimate vision is a future-ready fi- nancial system – one that is transparent, efficient, and competitive, capable of mobilizing retail sav- ings to fuel innovation and drive sustainable eco- nomic progress across the continent. Could the EU Retail Investment Strategy contribute to a more competitive Europe? O rganisedby theMinistry of the Economy, the Luxem- bourgChamber of Com- merce, FEDIL –TheVoice of Luxembourg’s Industry and IDEA, in cooperationwithPwCLuxem- bourg, this year’s editionof the Journée de l’Économie (JEcolux 2025) encourages discussionon the topic “IsAI simply overhyped, an essential driver of progress, or a real opportunity for transformative change?”Registrations for the Jour- née de l’Économie 2025, taking place in the formof a physical event at theChamber of Commerce inLuxembourg on 24March 2025, are nowopen. ArtificialIntelligence(AI)hassignificantly evolved in recent years, with remarkable developmentsacrossvariousfields.These rapid advancements have sparked a glo- bal dialogue, with opinions ranging from enthusiastic endorsement to cautious scepticism. AI technologies are reshaping industries and transformingnumerous sectors,with their influence steadily growing in every- day life. However, as these technologies continue to expand, they also raise critical questionsabouttheirtrueimpactonbusi- nessesandeconomies.DoesAIgenuinely drive economic growth and innovation? Is Luxembourg, with its strong financial sector and emerging tech ecosystem, well positioned to explore and capitalise on AI’s potential?What does the future hold forAIadoptionandregulationinLuxem- bourg andon the global stage? TheJournéedel’Économiewilldelveinto the impact of AI across various sectors, with a particular emphasis on the role of governments and will also explore how Luxembourg and Europe can achieve their digital ambitions. The event will feature dynamic discus- sions where market experts will exam- ine the benefits and challenges ofAI and emerging technologies on businesses, as well as on energy and digital transition, sharing insights onhowthese newtech- nologies can transform the economic landscape. Asalways,theproceedsfromtheregistra- tionwillbeentirelydonatedtoadeserving organisation, i.e. MEC asbl. Registration feesfortheconferenceamountto70euros. Speakers As every year, this unique event will bring together economists, members of the Luxembourg government – includ- ing LexDelles , theMinister of the Econ- omy, SME, Energy, and Tourism – as well as many representatives of the pri- vate sector to explore the potential, chal- lenges, and implications of AI for businesses and our economy. NadiaCalviño ,PresidentoftheEuropean Investment Bank Group, will address a keynote speech and explain the role of fi- nancialinstitutionsindrivingdigitaltrans- formation. Prof. Philippe Aghion , Economist, will explore the question, “Should we fear AI?”. A professor at the Collège de France, INSEAD, and theLondonSchool of Economics, as well as a fellow of the Econometric Society and the American Academy of Arts and Sciences, his re- search focuses on the economics of inno- vation and growth. DrLucJulia ,ChiefScientificOfficeratRe- naultGroup,willaddresstheprovocative question, “GenAI: myth or reality?” One of the designers of the Siri voice assistant and a co-founder of several SiliconValley startups, Dr Julia is also the author of the best-selling book “There is no such thing as Artificial Intelligence” (published in 2020). To find out more about the event, visit our website: www.jecolux.lu Journée de l’Économie 2025 AI Technologies: Overhyped, imperative or real opportunity? ! 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