deposit-taker’s European “passport”
The European Second Banking Coordination Directive helps foster the creation of a single European market in financial services.

A firm that is authorised as a deposit-taker in one European Economic Area state (its home state) can deal with business from any other European Economic Area state (a host state), without requiring additional authorisation from the host-state regulator.

It can provide its services

• into the other state, (cross-border – by post or internet) or
• in the other state (by establishing a branch).

European Economic Area
The European Economic Area comprises the European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom) plus the European Free Trade Area (Iceland, Liechtenstein, Norway).

But the Isle of Man and the Channel Islands are not part of the United Kingdom or of the European Economic Area.

how it works
A French deposit-taker, authorised by the Commission Bancaire, does not require authorisation from the Financial Services Authority to operate in the UK. It simply asks the Commission Bancaire to notify the Financial Services Authority that it is already authorised in France but intends to do business in the UK. Similarly a UK deposit-taker, authorised by the Financial Services Authority, does not require authorisation from the Commission Bancaire in order to do business in France.

internet banking
One way in which firms are exploiting these rights is through cross-border internet banking. Firm A (a UK bank) already markets itself in Spanish into Spain over the internet – and plans to market itself in the local languages into France, Italy and Germany. Firm B (a French bank) already markets itself in English into the UK over the internet. The internet is not a place, it is a means of communication (like the post or the phone). But, looking at the internet site on their own computer screens, customers may not think about where the firm is actually based.

complaints
This can cause problems if there is an unresolved complaint. Wherever the customer lives, we can deal with complaints about services provided in or from a branch in the UK (whether the firm itself is from the UK or abroad). So, to its surprise, Firm A found that complaints by its Spanish customers would fall within our jurisdiction. But we cannot deal with services provided from a branch outside the UK, even if the customer lives in the UK. So, to its regret, Firm B found that its UK customers fell outside our jurisdiction.

why this is so
The policy of the UK government, and of the European Commission, is that it would be simpler to enforce compensation awards if complaints were dealt with by the ombudsman or other complaint-handling scheme where the firm is based.

A firm in Greece (for example) is more likely to comply with an award by the Greek ombudsman than it is to comply with an award by the UK ombudsman, and it would be difficult to enforce the UK ombudsman’s award if the Greek firm has no presence in the UK.

FIN-NET (financial redress network)
To deal with this situation, the European Commission helped us get together with financial sector ombudsman and complaint-handling schemes from 15 other countries to create a Europe-wide network. This was launched on 31 January 2001 under the unlovely title of FIN-NET. If a financial services customer in country A contacts an ombudsman in country A about a complaint covered by an ombudsman in country B, the ombudsman in country A will refer the complaint on – and help the ombudsman in country B with any required information about local law and conditions in country A.

EEJ-Net (European extra-judicial network)
In due course, FIN-NET will become part of EEJ-Net, a more ambitious network covering ombudsmen and complaint-handling schemes in all consumer sectors. As part of EEJ-Net, each state will establish a national clearing house.

Consumers will be able to approach the clearing house through their Citizens’ Advice Bureau or local authority trading standards office. The clearing house will tell them if there is an ombudsman or complaint-handling scheme, at home or abroad, which can deal with their complaint.

The UK clearing house, funded by the Department of Trade and Industry, should be established later this year. It will be run by the National Association of Citizens’ Advice Bureaux – supported by LACOTS, the association of local authority trading standards departments.