The 2011 AFI Global Policy Forum Consumer Empowerment and Market Conduct (CEMC) working group meeting

1. The 2011 AFI Global Policy Forum Consumer Empowerment and Market Conduct (CEMC) working group meeting 27 September, Riviera Maya, Mexico

2. The CEMC WG from Malaysia to Mexico • 18 member organizations established CEMC WG • Set objective • Identified 4 priority areas • Agreed on content for charter and concept note • Agreed to undertake member survey • Set up coordination group • Agreed on content for work plan • Charter and concept note drafted • Survey undertaken • Coordination group functioning • 18 member organizations represented in the second meeting • CEMC is activated • The CEMC WG has a logo • and a work space: AFI Member Zone • Launch: KL, 7 April 2011 • Second meeting: RM, 27 Sept 2011

3. 28 AFI members represented in the CEMC WG • Banco Central del Paraguay • Banco Central do Brasil • BancoNacional de Angola • Bank al-Maghrib • BangkoSentralngPilipinas • BCEAO • Bank Indonesia • Bank Negara Malaysia • Bank of Thailand • Bank of Uganda • Bank of Zambia • Banque Centrale de la Rép. de Guinée • BanqueCentrale du Congo • Central Bank of Armenia • Central Bank of Kenya • Central Bank of Liberia • Central Bank of Tanzania • CNBV, Mexico • Ministère de l’Economie et des Finances du Senegal • Ministry of Economic Development and Trade, Russia • National Bank of Rwanda • National Credit Regulator, South Africa • Palestine Monetary Authority • People’s Bank of China • Reserve Bank of Malawi • State Bank of Pakistan • Superintendencia de Peru • Superintendenciade Guatemala • New members in yellow/green

4. Agenda

5. Priority areas • MARKET CONDUCT • i) transparency and disclosure • ii) sales and marketing practices • CONSUMER EMPOWERMENT • iii) avenues for help and redress • iv) financial literacy, capability and awareness

6. CEMC WG’s objectives • To promote the adoption of evidence based policy and regulatory solutions for the empowerment and protection of financial consumers, which is also correlated with improving access to finance and the quality of financial inclusion • To develop a set of core principles/guidelines for financial consumer empowerment and protection policymaking • To support the design and validation of tools for policy analysis and policymaking for use by working group members

7. Meeting goals • To present the preliminary results of the members’ survey and agree on the next steps • To discuss the potential role in the implementation of the G20 Principles • To elect the chairperson • To approve the charter and concept note • To find agreement on the expected outcome and outputs • To establish subgroups • To design the CEMC WG’s log-frame • To revise the work plan

8. Preparatory documents • First meeting minutes and list of participants • Second meeting agenda • Second meeting participants list • Consolidated results of CEMC WG survey • Draft CEMC WG concept note • Draft CEC WG charter • Draft G20 High-level principles on financial consumer protection

9. Members’ update • Central Bank of Uganda visited Mexico and Peru and released new National Framework on Financial Literacy and Financial Consumer Protection • KoidSweeLian, AFI Policy Champion and CEMC WG founder, appointed CEO of the Malaysia AKPK • Others?

10. Session I CEMC WG members survey Preliminary results • Scope of the analysis • Survey objectives • Respondent demographics • Preliminary results and observations • Survey trends • Roadmap to good policy practices

11. CEMC WG survey: scope of the analysis Good policy practices

12. CEMC WG survey: objectives • To gain a better understanding of WG members experiences, current plans, and challenges ahead related to the WG’s four priority areas • To provide a foundation from which WG members can self-diagnose their respective policy approaches, to determine how to best enable safe and sustainable policy and regulatory frameworks for financial inclusion • To inform the development of a road map towards good policy practice for consumer empowerment and market conduct

13. CEMC WG survey: respondents demographics Angola 17 Total Africa 17countries BCEAO RD Congo Kenya Malawi Senegal Uganda 3 banks regulators 11 central banks 3 ministries Zambia Guatemala LAC Mexico Paraguay Peru Palestine MENA Armenia 2 billion people China ECA Philippines Russia

14. NUMBER OF AGENCIES WITH RESPONSIBILITY CEMC WG survey: demographics • 45 (average 2.6 per country) • Mostly central banks and ministries, but also capital market authorities, insurance authorities, consumer protection agencies, and few microfinance authorities

15. CEMC WG survey: categories • INSTITUTIONAL LANDSCAPE • Mandate • Interagency coordination • Consultative approach • MARKET CONDUCT • Regulation • Oversight • Remedial actions • Enforcement • Self-regulation • Transparency and disclosure • Sale and market practices • Ancillary areas • CONSUMEREMPOWERMENT • Avenues for help and redress • Financial literacy, capability and awareness

16. MANDATE – MARKET CONDUCTWhat are the main functions of the agencies? Most commonly, the involved agencies cover the three functions: regulating, supervising, and enforcing market conduct regulation Often the legal basis is the central bank law and the banking law. In a few cases the mandate is embedded in the constitution

17. MANDATE – CONSUMER EMPOWERMENTWhat are the main functions of the agencies? Agencies answer consumer queries and often play a role in delivering programs to increase consumer’s awareness. Debt counseling is commonly left to specific agencies.

18. PARTICIPATIVE APPROACHDo advocacy groups have a formal role? Consumer advocacy organisations play a fairly limited role in the policymaking and regulatory process. In nearly 50% of the countries, consultation with consumer advocacy groups play no role. Only in two countries the advocacy groups have a further role helping consumers to file complains. In less than 30% of the countries they have any formal roles, responsibilities, or duties related to consumer education In designing and implementing consumer empowerment policies and market conduct regs Financial education

19. LANDSCAPEThe two main weaknesses and priorities over the next year • The assessed primary weaknesses in the financial sector are overwhelmingly: • the limited access to (formal) financial products; and • the low level of financial literacy. • This doesn't imply that each area not flagged by a country is necessarily fully satisfactory. • In terms of priorities, the dominant priority is to increase financial literacy. The second is to increase protection for bank clients (only ½ the level of support as for financial literacy).

20. MARKET CONDUCT – LEGAL BASISWhat legal documents govern market conduct regulation? Relevant legal provisions are most often found in either general consumer protection legislation or in financial sector regulations. Combining these answers with other questions, likely other legal acts (on payment systems, credit bureaus, insurance, pensions, and securities) may include market conduct provisions; and these laws often contain conflicting provisions. • Market conduct provisions are diffused in multiple laws. • Most countries do not have specific legislation for financial consumer protection.

21. MARKET CONDUCTWhich products and providers are covered? Formal lenders and deposit takers are likely to be regulated. Not the market of mobile financial services. Why? Hypothesis: a) it’s less risky b) it’s too new – there is no sectoral regulation

22. MARKET CONDUCTWhich areas are covered? • The focus of market conduct regulations is on disclosure of the cost of financial services. • A minority of countries also provide for complaints handling and redress mechanisms and for disclosure in advertising. However, almost all areas are covered, so there are a number of members from whom lessons can potentially be learned.

23. MARKET CONDUCT – OVERSIGHTWhat market conduct oversight activities can be undertaken? Limited use of specific market conduct oversight techniques such as media monitoring and mystery shopping. Why?

24. MARKET CONDUCT – OVERSIGHTNumber of inspections conducted in one year • Although on- and off-site inspections are the primary compliance monitoring tools, 65% of countries does not have a specific audit or inspection programme for consumer protection monitoring. • This may be an area where substantial improvement can be made in the short term. In-site • Is there a specific checklist or auditing program that focuses on consumer protection issues? Off-site

25. Is market conduct supervision a general duty of supervisory staff (e.g. banking department) in the course of normal inspections?In more than 80% of the countries, yes. This could be a point of consensus in making future recommendations (w development of adequate tools) MARKET CONDUCT – OVERSIGHT Dedicated staff Are there dedicated staff responsible for market conduct supervision at any of the agencies you identified in question 1?In half of the countries the answer is positive

26. MARKET CONDUCT – REMEDIAL AND ENFORCEMENT ACTIONSWhat is the nature of the enforcement action? In most countries, remedial action on consumer protection issues is limited to letters of warning, although 65% of countries does have the power to issue monetary fines for non-compliance. • Number of times this action of this type was taken in 2010 Your answers seem to indicate that 55% of the countries have issued between 1 and 5 fines for market conduct compliance Surprisingly high

27. MARKET CONDUCT – SELF-REGULATIONStandards/codes of conduct The majority of the countries have codes of conduct. In those cases, the regulators has often endorsed the code, which is enforced by a third-party. • Are there industry codes of conduct in your country which identify specific market conduct standards? If so, has the regulator endorsed the code of conduct? • And, is there a self-regulatory body (or bodies) that is responsible for enforcing of the standards?

28. MARKET CONDUCT – SELF-REGULATIONStandards/codes of conduct The codes of conducts probably refer mostly to banking codes of conduct (followed by insurance). It seems that the codes mostly deal only with generic issues, and not with specific consumer protection issues. Which products/services are covered? What providers are required to comply? What types of providers have to comply with the standards or codes of conduct? What areas are covered?

29. MARKET CONDUCT – PRICING, TRANSPARENCY & DISCLOSUREDoes your country have transparency & disclosure regulations? Does your country have transparency and disclosure regulations? Most countries do have some form of transparency regulation, mostly focused on interest or cost calculation. However, there is no uniform approach in calculating the cost of credit (see next slide) Is a specific format mandated for loan documentation? Only a minority of countries have a requirement for standard pre-agreement disclosure for financial service contracts. This may require attention in conforming to the G20 principles. Is there a standard template for either the disclosures or the contract that is endorsed by the regulator?

30. MARKET CONDUCT – PRICINGPrice calculation formula mandated for credit products What specific charges and fees are included in the formula?

31. MARKET CONDUCT – TRANSPARENCY & DISCLOSURE - DEPOSIT AND SAVINGS PRODUCTSWhat information is required to be disclosed to the client? (Before Sale *)

32. MARKET CONDUCT – TRANSPARENCY & DISCLOSURE – CREDIT PRODUCTSWhat information is required to be disclosed to the client? (Before Sale *)

33. MARKET CONDUCT – TRANSPARENCY & DISCLOSURE – MONEY TRANSFERSWhat information is required to be disclosed to the client? (Before Sale *)

34. MARKET CONDUCT – TRANSPARENCY & DISCLOSURE – PAYMENT SERVICESWhat information is required to be disclosed to the client? (Before Sale *)

35. MARKET CONDUCT – TRANSPARENCY & DISCLOSURE – E-MONEYWhat information is required to be disclosed to the client? (Before Sale *)

36. MARKET CONDUCT – PRICING AND TERMS AND CONDITIONS OF COMPARABLE PRODUCTS/PROVIDERSIs the information provided to consumers? Around 50% of countries publish some comparative information on the pricing or terms and conditions of financial services. This is mostly published in the central bank website. If it is recognized the importance of this information for customers, how to make it available to the majority of the clients? If yes, where?

37. MARKET CONDUCT – TRANSPARENCY AND DISCLOSUREContinuing information to customers Is the provider required to provide periodic information to the client regarding their deposits/savings? If yes, what is the due communication? Around 75% of countries require periodic disclosure of information on deposit or savings accounts, mostly through disclosure in account statement

38. MARKET CONDUCT – TRANSPARENCY & DISCLOSUREWhat are two main priorities for the next year?

39. MARKET CONDUCT – SALES AND MARKETING PRACTICESIs there any regulations for sales and marketing practices? • More than 40% of countries have no regulation on sales and marketing practices.

40. MARKET CONDUCT – SALES AND MARKETING PRACTICESWhat conducts and providers are regulated? It seems that banks and NBFIs covered similarly

41. MARKET CONDUCT – SALES AND MARKETING PRACTICES Is there any regulatory provision that mandates the provider: To what providers does this apply?

42. MARKET CONDUCT – SALES AND MARKETING PRACTICESThe two main priorities for the next year

43. MARKET CONDUCT – ANCILLARY AREASCredit bureaus Credit information sharing and credit bureaus: Describe the nature of credit information sharing, in relation to the statements below. Many countries have implemented credit information sharing initiatives, although participation is mostly limited to banks. In most cases MFIs are not included in the credit bureau system (see next).

44. MARKET CONDUCT – ANCILLARY AREAS Credit bureaus For "These institutions report information to the credit bureau", please select : For "These institutions have access to the collected information", please select :

45. MARKET CONDUCT – ANCILLARY AREASAbusive clauses Abusive clauses: Is there any clause, term, or condition that, if inserted in a contract, is automatically considered void or “deemed unwritten”? Only a minority of countries have any specific limitations on unfair contract terms. This may be an area where significant improvement is possible.

46. MARKET CONDUCTThe main priorities for the next year • In your country, what are the four main priorities for the next year for enhancing market conduct policy and regulatory framework? Please select up to four priorities, with 1 being the highest priority.

47. CONSUMER EMPOWERMENTComplaint handling and redress mechanisms • Do consumers have access to affordable and efficient complaint handling and redress mechanisms in your country? • Is the access to affordable and efficient complaint handling and redress mechanisms a statutory right in your country?

48. CONSUMER EMPOWERMENTComplaint handling and redress mechanisms • For each of the help and redress mechanisms listed in the table below, indicate whether a solution is in place.

49. CONSUMER EMPOWERMENTComplaint handling and redress mechanisms • What types of clients can file a complaint?

50. CONSUMER EMPOWERMENTComplaint handling and redress mechanisms • The decisions of the regulators and/or ombudsmen binding upon