A comparative analysis of the US and EU retail banking markets - Wsbi

Following the same logic, the EU consumer protection rules
seem to be the appropriate and adequate response to the
fact that EU consumers are generally more risk averse and
more inclined to save.
Information is key in both markets –
enables customers to make their own choice
Information disclosure is a cornerstone of consumer protection
in both the EU and US legal systems. An important number
of US laws applicable to consumer credit focus on
appropriate and transparent information for consumers.
EU policy also considers essential the need to provide
consumers with adequate information to enable them to
make an informed choice. At the EU level, however, the
information disclosure regime is less detailed than in the US,
a likely consequence of the aim in the EU to set a number
of common requirements above which Member States can
legislate further.
Despite high consumption levels in the US –
no duty to advise
Despite generally higher levels of consumer protection rules
in the US a duty on lenders to advise consumers on the most
appropriate type of credit does not exist there. This could in
any case be deemed an unnecessary requirement under a
system which aims to ensure that consumers receive all the
necessary information so that they can make the best
choice: a common aim of both the US and EU systems.
At the European level the debate on a mandatory duty to
advise is still on-going, in which the industry draws attention
to the fact that the responsibility for a credit decision can
and should not be taken by the bank, but by the consumer
himself as he knows his own situation best.
US credit data market – triggered by high
consumption levels
The credit data market in the US is larger than in the EU, and
in the US credit data is made available not only to financial
institutions (as in the EU) but also to many other actors to
whom credit data is of interest such as employers and
landlords. Given the large number of consumer credit
reports put into circulation in the US, legislation has been
put in place to limit the risk of data errors and abuses.
In the EU the categories of databases are very heterogeneous
(content and ownership wise), and the levels of personal
data protection are very different. Bilateral and multilateral
agreements among owners of central credit databases are
likely to increase if there is a larger demand from lenders to
access credit databases from different Member States. It is
noteworthy in this context that global credit data firms
already operate on both sides of the Atlantic.
Customer Satisfaction Index –
a model for the EU
In contrast to the common use of a uniform Customer
Satisfaction Index in the US, it seems difficult to establish or
to further promote a uniform tool to measure consumer
satisfaction levels in the EU as a whole. While in the
European political debate, there are increasingly calls to
increase consumer satisfaction levels, in particular in the
context of consumer opportunities arising from the EU
single market, there appears to be an important information
gap concerning what are the real expectations and current
needs of European consumers. What is more, sometimes
evidence on the potential gains for European consumers
from introducing further internal market legislation is not
sufficiently compelling to justify an increase in the regulatory
burden. There is thus a strong argument in favour of
establishing a European Customer Satisfaction Index to
assist companies as well as policy makers to measure and
analyse the real needs and expectations of consumers.
Home lending - different market sizes
and different players
Credit to buy residential property represents the main type
of credit to households in both the EU and the US. In terms
of size, the US home loan market is more than twice the size
of the EU market, each representing respectively, €6.1 trillion
and €3.5 trillion. The EU home loan market is also much
smaller relative to GDP (38%) than that of the US (63%),
though a few EU countries have a similar or higher ratio of
residential housing debt to GDP than the US.
While retail banks are the main lenders and players in
the European home loan market, this is not so in the US,
where specialised mortgage banks are the main lenders,
and government sponsored entities the main sellers of
mortgage loans via secondary markets.
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