The European Commission and financial capability – simplifying financial services

The EC is taking initiatives to increase the financial capability of EU consumers: ensuring that they understand the financial products available in the market, are able to manage their personal finances efficiently, and can make informed choices between different bank accounts, insurance policies or credit agreements. The participation of several high-ranking EU officials at a conference on ‘Increasing Financial Capability’, hosted by the Commission in Brussels in March 2007, shows that the European institutions are taking this issue to heart. This ECRI policy brief examines why these policies are needed, analyses the EU action in this area and assesses the likely future developments.

Filipa Figueira, research assistant, European Credit Research Institute of the Centre for European Policy Studies, Brussels

Why financial capability is important

At first sight, it may seem that the EC would have more pressing issues to give their attention to than whether consumers understand financial services. This could appear as a trivial matter, compared to promoting economic growth or reducing unemployment across the EU. However, there are two reasons why financial capability is important from a public policy perspective and deserves the careful attention of policymakers.