ING's Hamers Says EU Investing Needs Retail Safeguards to Grow

  • Onus is on national markets authorities to set clear standards
  • ESMA's Maijoor says EU capital markets need retail investors

Retail investors need more safeguards so they can play a much-needed role in European investment, said Ralph Hamers, chief executive officer of ING Groep NV.

For Europe’s capital markets to reach their full potential, households need a way to buy corporate bonds, take part in crowdfunding and take advantage of other investment channels, Hamers said in an interview in Brussels. At the same time, consumers deserve to know exactly what they’re buying, what local laws apply and how much risk they ultimately bear in each nation that permits these types of purchases to take place, he said.

“There is an obligation here from the markets authorities -- the respective markets authorities in these countries -- to take the initiatives to set up a very clear framework as to what they allow and what they don’t allow, rather than leaving it until accidents happen,” Hamers said.

Hamers has changed the focus of Amsterdam-based ING from global markets to Europe, where banks face a squeeze on profits amid competing economic pressures. The European Central Bank is holding interest rates at record lows, while regulators press banks to bolster capital, stoking competition for savers’ money and putting pressure on banks to cut back lending.

‘On the Hunt’

ING is now looking at how financial technology can help draw in more business, and Hamers said the bank could buy start-ups that mesh with its existing offerings. “’We are actively on the hunt for ones that fit our strategy and where we feel that they have a superior practice,” he said.

ING invested in WeLab, an operator of online lending platforms backed by Asia’s third-richest man Li Ka-shing, in January. The Dutch company in September acquired Qustomer, a Belgian site that allows users to collect and redeem loyalty points from retail outlets, and took a stake in Kabbage, an American automated lending platform, the following month.

Hamers praised efforts by Jonathan Hill, the European Union’s financial-services commissioner, to review what investment products are currently on the market and who should be buying them, as part of his push to broaden the bloc’s capital markets. He said regulators must find a balance that protects consumers without drying up capital markets, in a way that boosts transparency for the ultimate investor in a given security.

“I think there is a responsibility here for these markets authorities to be a little bit more proactive on this,” Hamers said.

Bankruptcy Laws

To wean European companies off their dependence on bank loans, Hill has pushed for the 28-nation bloc to create a capital markets union that breaks down barriers to cross-border finance. An action plan released last year runs the gamut from promoting asset-backed securities to easing issuance disclosure rules for small businesses and looking into how national bankruptcy laws stack up.

Meanwhile, retail investors in Spain and Italy have been threatened by new rules on bondholder losses that put junior bank bondholders on the hook when they hold preferred shares or other subordinated debts of failing financial firms. Regulators say that market authorities -- not bank supervisors -- must take up the mantle of protecting consumers against misselling for capital markets to grow as they should.

“If we want to have a successful capital markets union, we need to have a situation where also retail investors, retail households participate in the capital markets,” Steven Maijoor, head of the European Securities and Markets Authority, said last month. At a reception sponsored by Deutsche Boerse AG, the Frankfurt-based exchange, he said markets need funding from a broader investor base, while households should bolster their nest eggs with higher returns than cash savings accounts can provide.

“If you want to have a reasonable return on your private retirement savings, participation in the capital market is essential, and therefore consumer protection is essential,” Maijoor said.

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