Isărescu says that he does not want to take over the protection of banking consumers, but that he accepts it

The governor of the National Bank of Romania spoke publicly for the first time regarding the transfer of consumer protection duties from ANPC to the central bank. Although he wanted to appear categorical, Mugur Isărescu appeared rather undecided. During his entire speech at the opening of a conference that took place yesterday at the BNR headquarters, Governor Isărescu argued that banking supervision and consumer protection come into conflict, but he emphasized that, if the legislator decides, the National Bank will also take over the task of protecting them on banking consumers, but only within a direction totally separate from the supervisory one, which should be called differently and which should function in a different building than the central bank.

In a second intervention, which followed that of Alexandru Păunescu, director of the Legal Department of the BNR - he opined that the prudential supervision of banks and consumer protection are complementary, by no means conflicting -, Mugur Isărescu returned and repeated that the two are conflicting, even if they can work together and complement each other at a given moment, having good results.

Moreover, the Governor has repeated on several occasions, over the years, that the BNR deals with the regulation and supervision of the banking system and not with consumer protection.

However, in November 2022, in a letter addressed to the Parliament, quoted by the press, Mugur Isăerescu expressed for the first time the intention of the National Bank to become the Consumer Protection Authority again, as it was before 2008: "At the level of the National Bank of Romania legislative proposals have been developed in order to establish a legal framework through which competences regarding the protection of consumers of financial-banking products and services will be assigned to the NBR. This approach aims at the Central Bank taking over the responsibilities of the National Authority for Consumer Protection in terms of regarding the financial-banking products and services provided by the entities within the area of competence of the National Bank of Romania, according to the legal framework in force, without fundamentally changing the content or the way of exercising these powers. The legislative proposals, formulated in this way, are to be communicated to the legislative initiator, in order to promote the draft normative act to be submitted to the parliamentary debate".

Yesterday, the head of the central bank pointed out that there has been a confusion between banking supervision and consumer protection, after the 2008 crisis and especially after the Swiss franc (CHF) credit crisis. The governor specified: "The banking system is not a game, there is no way to transfer the savings from those who have availability to those who need financing. If the financial banking system disappears, then the economy no longer works. Consumer protection is even conflicting with bank protection. When you have a banking crisis, you have ten million small depositors to protect. This means the protection of the banking system. Those who take loans should take care of them".

Mugur Isărescu emphasizes that it is difficult for a department within the Consumer Protection Authority (ANPC) to take care of banking consumers and that, in this context, the issue of transferring this service from ANPC to the BNR arises. The head of the National Bank believes, however, that the banking supervision department has nothing to do with the one for the protection of debtors: "If the legislator establishes this, then there will be a totally separate department. My view is that it will have to be called something other than surveillance. The supervisors even tell the bank to take the money back from the debtor, because it belongs to the depositor: "Force the debtor to give you the money back, because you have to return it to the depositor!" This does not sound like the protection of debtors. The two directions must be separated, be called differently, even function in separate buildings, because they have special functions. Let's be with our heads on our shoulders and our minds free! A balance must be found, and the decision is a difficult one. If, however, the executive and the legislature will make a decision in this regard, then we are prepared to deal with the protection of the consumer of financial services, but separately from what we do here and only under a legislative decision".

Any banking scandal destroys the credibility of the central bank, and this is serious, Mugur Isărescu opines, appreciating that, if a series of European central banks have agreed to have consumer protection under their control, then the BNR will also be able to do so, resolving any conflict -it is easier when it takes place between two directions under the same roof.

In Alexandru Păunescu's opinion, not only can the BNR have consumer protection from a legal perspective, but it is also morally obliged in this sense. Considering the NBR's attributions as a prudential supervisor, the complementarity of the National Bank's attributions with tasks related to consumer protection would allow an integrated approach, he appreciates, emphasizing that prudential supervision and consumer protection are two interconnected parts that, together, contribute to a more stable financial system : "Adequate consumer protection contributes to the stability of the financial system. A problem related to consumer protection can generate financial instability. (...) The complementarity between prudential supervision and consumer protection attributions within the National Bank becomes essential. An integrated approach can strengthen financial stability, reduce the risks of the banking system and protect the interests of consumers. Through effective coordination and cooperation, a safer and more transparent banking system can be built, thus promoting sustainable economic development and consumer confidence in the financial markets. The complementarity between the two brings significant advantages - prudential supervision prevents banking risks and maintains financial stability, and consumer protection ensures trust in financial services and promotes transparent and fair relations between banks and consumers".

The relationship between the two attributions is, therefore, one of complementarity and in no case of conflict, reiterated Alexandru Păunescu, mentioning that this relationship of interdependence must be explicitly established at the regulatory level.

Lawyer Valeriu Stoica highlights that, first of all, the approach of the supervisory and regulatory institutions must be neutral, identifying the best solutions in this sense: "I think that the solution from neighboring countries - this attribution to prevent conflicts in the market - can be fulfilled very well by the central bank. There are positive results elsewhere. The first advantage is the goal of the BNR, namely financial stability. Then the attributions he has to fulfill this purpose. It is also about the competence of the NBR specialists and especially about the permanent test given by the National Bank - the test of neutrality. Without this principle, regulation and supervision risk not being immune to populism. A legislative initiative is needed in this area, and partisanship should not work in this case. Political parties by definition are partisan, but financial stability is not the interest of an electoral segment, it is the interest of all. Then, a reasonable solution would be the adoption of a legislative project providing for the transfer of consumer protection to the NBR".

The relationship between consumers and banks is not a zero-sum game, i.e. if someone makes a profit, someone else should not make a loss, says George-Cristian Tuţă, Chamber of Deputies Chester, appreciating that we need to eliminate the conflict between the two camps: " I am willing to build this legal framework that will allow the National Bank of Romania to take over consumer protection attributions. I am not alone in this fight in the Parliament, we have already had discussions on the subject and most of us agree with it".

The legislative provision is stipulated in the proposal regarding the modification and completion of some normative acts in order to increase financial inclusion. Among other things, the draft law amends art. 4, lit. a, from Law 258/2017 regarding the comparability of fees related to payment accounts, the change of payment accounts and access to payment accounts with basic services, by replacing ANPC with BNR, as the competent authority in the field.

Of course, ANPC representatives do not agree with this project. Horia Constantinescu, the ANPC president, recently told us that each of the two institutions must carry out its activity as provided for in the current law: "As the Latins used to say - «Qui custodit eos qui custodiun?» (who guards those who guard?) If at this moment we are protecting the rights of consumers, I am convinced that we should continue to do so, especially since many of the cases were won by the ANPC, that is, we did not really harm this I even expect that, at some point, it will be understood that we need new normative acts and additional levers, not their reduction, to perform the financial consumer protection of the financial-banking consumer at an optimal level".

• Eugen Rădulescu, BNR: "The banking system is doing more than honorable"

The banking system in our country is doing more than honorably, highlighted, yesterday, Eugen Rădulescu, advisor to the governor of the BNR, emphasizing that our banking sector is in the "green zone" with all eight indicators calculated by the European Banking Authority (EBA). , placing us above the European average from this point of view: "We are in the best group with all eight indicators and it is the first time since the implementation period of the monitoring table began. That's why the banking system is part of the solution, not part of the problem, at the moment".

Among other things, Eugen Rădulescu pointed out that, in the last decades, we have had a spectacular evolution of the economy, this year having a GDP of 1,600 billion lei, and the welfare gaps being reduced. The flip side of the medal, however, is represented by the twin deficits, the BNR representative warns: "We have the budget deficit and the current account deficit, which represent a major problem for macro-financial stability. We will not have macro-financial stability if these two problems are not solved. (...) We are fighting as the only country with an excessive deficit in the European Union. And, no surprise, the current account deficit is very, very large, because the two are very closely linked".

Eugen Rădulescu added: "While, at the macroprudential level, the final objective is to avoid the economic costs of financial instability, at the microprudential level the objective is to protect the consumer, both as an investor and as a depositor, because if a bank fails, then the shareholder pays. We have a mix that includes macroprudential policy, fiscal policy, microprudential policy, monetary policy and competition policy, all five interacting to ensure the good functioning of the national economy".

• Alexandru Păunescu, BNR: "A problem related to consumers protection can generate financial instability"

In the last decades, the financial market has evolved complexly and rapidly and, in the new context, it is not enough for the National Bank to focus only on financial institutions, it should also pay attention to the consumer of financial services, says Alexandru Păunescu, Director of the Legal Department from the National Bank of Romania.

He mentioned: "After the crisis of 2008, the NBR received a series of requests and complaints from consumers and some consumer protection associations regarding matters related to the way the contracts that the said consumers work or do not work they concluded them with commercial banks. Our classic answer from that moment and onwards is that the National Bank of Romania has no powers in the field of consumer protection, nor can it get involved in resolving issues related to contracts concluded between clients and banks. (...) The complementarity between financial supervision and consumer protection duties is an essential component of a robust market framework, and the collaboration between the ECB and the EBA is an example of this".

Alexandru Păunescu says that, at the European level, out of the 17 central banks that have a prudential supervision department, ten have also had a consumer protection department for years: "We are talking about the development of the legislative framework regarding consumer protection, the exercise of supervision of credit institutions from the perspective of ensuring compliance with the legal framework of consumer protection, the prohibition of unfair unfair and discriminatory practices, the evaluation of the legitimacy of some complaints that consumers send to the respective central banks, the promotion of transparency and fairness in the relations between intermediaries and their clients, the transparency of information offered to consumers and, in general, compliance with the regulatory framework for financial products and services, the resolution of complaints, the implementation and coordination of financial education activities. The central bank of Romania is anyway involved in this financial education without having foreseen this at the regulatory level.

My opinion is not only that the BNR can also have consumer protection from a legal perspective, but it is morally obliged. Considering the NBR's attributions as a prudential supervisor, the complementarity of the National Bank's attributions with tasks related to consumer protection would allow an integrated approach. Prudential supervision and consumer protection are two interconnected parts that, together, contribute to a more stable financial system".

Alexandru Păunescu emphasizes that, at the European level, there is only one authority - the European Banking Authority - which issues guidelines, both in terms of consumer protection and in the field of banking prudence.

"Adequate consumer protection contributes to the stability of the financial system", concludes the BNR representative, appreciating that a problem related to consumer protection can generate financial instability: "Consumer protection of financial services must exist! Consumer protection does not regulate costs, does not regulate commissions and does not propose to intervene on the business model of banks, but aims to counterbalance the asymmetry of information in the contractual relationship between the bank and the consumer, by guaranteeing transparency levers and by informing the consumer. All these policies contribute to strengthening the ability of consumers to make the best decisions in relation to their financial situation. Good information on financial-banking services requires not only an understanding of the contractual clauses assumed in the relationship with the bank, but also a minimal understanding of the economic phenomenon, of the effective lending mechanism, for example. Through the expertise it possesses, we can say that the National Bank of Romania is the best place to ensure the financial education of consumers, being already involved in various projects of this kind, this not being the only aspect related to consumer protection in which the central bank is already involved. The establishment of the Center for Alternative Dispute Resolution in the Banking field took place in 2015, through the coordination of this project by the National Bank of Romania.

Thus, the complementarity between the attributions of prudential supervision and those of consumer protection within the National Bank becomes essential. An integrated approach can strengthen financial stability, reduce the risks of the banking system and protect the interests of consumers.

Through effective coordination and cooperation, a safer and more transparent banking system can be built, thus promoting sustainable economic development and consumer confidence in the financial markets. The complementarity between the two brings significant advantages - prudential supervision prevents banking risks and maintains financial stability, and consumer protection ensures trust in financial services and promotes transparent and fair relations between banks and consumers".

The relationship between the two attributions is, therefore, one of complementarity and in no case of conflict, reiterated Alexandru Păunescu, mentioning that this relationship of interdependence must be explicitly established at the regulatory level.

• Lawyer Valeriu Stoica: "There is room for negotiation and compromise on the credit market"

On the credit market there is room for negotiation and there is room for compromise, believes lawyer Valeriu Stoica, the specialist being of the opinion that, in this field, we are talking about an artificial litigious situation: "Professionals have common interests, the game framework defines the rules of these interests, it is so obviously there are also divergences of interest. But we need to eliminate the factors that artificially fuel this situation, and we are also talking about an intellectual deficit here. There is a lack of financial and contractual education, and the approaches from professionals in this field are not always the most appropriate. The principle of neutrality is fundamental. In this field, the Center for Alternative Resolution of Banking Disputes (CSALB) has proven to be an inspired, viable solution. It's just that this center resolves what has already happened. But prevention is more important than therapy".

In this context, Valeriu Stoica emphasizes that, first of all, the approach of the supervisory and regulatory institutions must be neutral, identifying the best solutions in this sense: "I think that the solution from neighboring countries - this attribution to prevent conflicts from market - can be fulfilled very well by the central bank. There are positive results elsewhere. The first advantage is the goal of the BNR, namely financial stability. Then the attributions he has to fulfill this purpose. It is also about the competence of the NBR specialists and especially about the permanent test given by the National Bank - the test of neutrality. Without this principle, regulation and supervision risk not being immune to populism. A legislative initiative is needed in this area, and partisanship should not work in this case. Political parties by definition are partisan, but financial stability is not the interest of an electoral segment, it is the interest of all. Then, a reasonable solution would be the adoption of a legislative project providing for the transfer of consumer protection to the NBR".

• George Tuţă, Chamber of Deputies: "The transfer of consumer protection to the NBR is being discussed in Parliament"

The relationship between consumers and banks is not a zero-sum game, i.e. if someone makes a profit, someone else should not make a loss, says George-Cristian Tuţă, Chamber of Deputies Chester, appreciating that we need to eliminate the conflict between the two camps: " The relationship between the consumer and the service provider must be correct, and the BNR must transmit this relationship of trust, by educating providers and consumers: "A protected money starts with an educated person, financial education is an essential element in this equation. It is clear that the National Bank of Romania can play a prominent role in the consumer protection process. (...) In order to make this transfer of trust between the banking system and consumers, we have in the final debate, in Parliament, a project through which we propose to increase financial inclusion, by generating as much access of citizens to basic services as possible use them, but also through the obligation of the state to work with banking services and to help Romanians to interact much easier and much faster with the state, insisting on financial education.(...) I come before you with three clear proposals: in first of all, the Financial Education Day Law, which we have every year on April 11 - I would like to put it in the Book of Records and break the BCR record of 13,230 financially educated people (...); secondly, the Financial Education Strategy has been in public consultation for more than a year, and here the involvement of several people is needed to be adopted by the Government - I think that by the end of this year we should have it adopted, and on January 1, 2024, we will start implementing it and, thirdly, I am willing to build this legal framework that will allow the National Bank of Romania to take over consumer protection attributions. I am not alone in this fight in Parliament, we have already had discussions on the subject and most of us agree with it. We can do this together, because when people work together miracles are not impossible."