Standard 2.1. Code of conduct for the provision of financial services. Regulations and guidelines

Transcription

1 Standard 2.1 Code of conduct for the provision of financial services Regulations and guidelines

2 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) CONTENTS 1 Application 4 2 Objectives 5 3 Financial sector self-regulation 6 4 Legal basis 7 5 General principles for the provision of financial services General Proper practice in the provision of financial services Handling of customer complaints 9 6 Code of conduct for the provision of credit institution services _ Loans Obligation to provide information Obligation to request information Collateral Deposits Obligation to provide information Customers' right to basic banking services Means of payment Cancellation of payments from deposit accounts 15 7 Code of conduct for the provision of investment services 16

3 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 8 Reporting to FIN-FSA 17 9 Definitions Further information Obsolete guideline 20

4 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 1 APPLICATION (1) This standard shall be applied to the following supervised entities referred to in section 5 of the Act on the Financial Supervision Authority (587/2003): credit institutions Finnish branches of foreign credit institutions. (2) The standard shall be applied to credit institutions' customer relations where the customer is a consumer or, as applicable, to credit institutions' customer relations where the customer is a small company comparable to a consumer. (3) The standard shall also be applied to Finnish credit institutions' crossborder financial services provided from Finland to another country. (4) The standard shall not be applied to the provision of cross-border financial services from another country to Finland. (5) Here the general expression supervised entity refers to all entities under the scope of the standard, if not otherwise specified. (6) Supervised entities using agents for the provision of financial services are responsible for ensuring that their agents act in compliance with this standard.

5 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 2 OBJECTIVES (1) The objective of regulating the code of conduct followed by the supervised entities in their customer relations is to enhance compliance with proper practice and thus improve customers' confidence in the operations of the entities and the financial markets. The main purpose of regulating the code of conduct is to ensure that the customers of the supervised entities can make decisions concerning financial services based on sufficient and material information and that the supervised entities take the interests of their customers into account when they provide the services. (2) The objectives of the standard are to present the code of conduct for the provision of financial services clearly and concisely guide supervised entities to take customer interests into account in all respects and apply proper practice provide instructions on the obligation to request and provide information as far as such guidance is not available in the legislation.

6 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 3 FINANCIAL SECTOR SELF- REGULATION (1) The standard is based on the rules on good banking practice prepared by the Finnish Bankers' Association (2004).

7 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 4 LEGAL BASIS (1) In preparing the standard, the following directive has been taken into account: Directive 2002/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (32000L0012; OJ L 126, , p. 1). (2) The national regulation of the subject matter is based on the following legislation: Credit Institutions Act (1607/1993) Consumer Protection Act (38/1978) Act on Provision of Information Society Services (458/2002) Act on Guarantees and Third-Party Pledges (361/1999) Commercial Code (3/1734) Act on Credit Transfers (821/1999). (3) One of the tasks of the Financial Supervision Authority (FIN-FSA) is to guide financial market participants to apply proper practice in their operations. FIN-FSA's general power to issue guidelines is included in this obligation.

8 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 5 GENERAL PRINCIPLES FOR THE PROVISION OF FINANCIAL SERVICES 5.1 General Justifications Justifications Justifications (1) In the regulation of the provision of credit institution and investment services, the requirements concerning the code of conduct for the providers are presented differently depending on the financial service or financial instrument provided. This is reflected, for instance, in the terminology used in the legislation, depending on whether it concerns marketing, the obligation to provide information or both. The EU legislation also varies as to the requirements on how detailed information the service provider shall make available to the customer regarding different financial services and instruments. (2) Credit institutions' marketing and the contents of their marketing are regulated in section 82 of the Credit Institutions Act. In addition to the marketing of services, the section also contains provisions on the obligation to provide information. Section 50a contains provisions on customers' right to basic banking services. (3) The supervised entities shall not only comply with the provisions in the financial market legislation but they shall also take into account other legal requirements, such as the provisions on consumer credits in the Consumer Protection Act and the information to be disclosed in distance selling of financial services. The obligation to provide information is also regulated, for instance, in the Act on Provision of Information Society Services, the Act on Guarantees and Third-Party Pledges and the Commercial Code.

9 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 5.2 Proper practice in the provision of financial services (4) The supervised entities shall apply proper practice in their provision of financial services. Justifications (5) Proper practice maintains and furthers confidence in and the functioning, transparency and equality of the financial market. (6) Proper practice requires that the supervised entities act honestly, impartially, professionally, with care and taking into account customer interests in order to ensure confidence in the financial market request that their customers provide sufficient information on their financial position and, if necessary, their financial services objectives provide their customers with material information in order to support the customers' decision-making, such as information on the provider, contents, costs or charging basis of the financial services and the material risks related to the services comply with all regulations applicable to their business operations and act in accordance with the principles inherent in the regulations. (7) When applying the above-mentioned principles, account shall be taken of the nature of the relevant financial service and the customer's familiarity with the financial market. (8) The development of financial services and technology requires that the supervised entities continue evaluating and developing their practice, so that they can ensure conformity with the principles in question. 5.3 Handling of customer complaints (9) The supervised entities shall have internal instructions and codes of conduct for the handling of customer complaints. (10) The supervised entities shall monitor information obtained from customer complaints and other customer feedback, so that they can anticipate and prevent possible problems. Significant observations shall be reported to the supervised entity's executive management and board of directors, if necessary. (11) Customer complaints shall be handled without delay.

10 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) (12) The handling of customer complaints shall be arranged so that the process can be subsequently verified. The supervised entities shall save relevant documents and other records over a sufficiently long period of time considering, among other things, the nature of the subject. (13) The supervised entities shall provide their customers with information on methods of arbitration outside court, such as the Advisory Office for Bank Customers and the Consumer Complaint Board.

11 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 6 CODE OF CONDUCT FOR THE PROVISION OF CREDIT INSTITUTION SERVICES 6.1 Loans Obligation to provide information Binding (1) The supervised entities shall provide their customers with sufficient information on various loan alternatives, key loan terms and loan-related expenses. (2) Prior to entering into the loan contract, sufficient information on the details of the loan shall be disclosed to the customer. Depending on the loan type, at least the following information shall be provided: interest rate alternatives and interest rate structure bilateral contract termination clauses including particular terms and charges for premature termination or repayment of the loan all costs arising from the withdrawal and management of the loan (eg interest rate, service fees, notification costs) estimated loan management costs risks arising from economic variables affecting the loan maturity (eg risks related to long-term variable rate housing loans) key taxation effects (eg interest tax deductibility, position of firsttime house buyers) and possible government support types (eg government guarantee) the legal meaning of possible loan collateral. (3) Customers who are consumers shall also be provided information according to the Consumer Protection Act, such as the annual percentage rate

12 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) of consumer credit Obligation to request information Justifications Binding (4) Prior to granting the loan, the supervised entity shall obtain sufficient information on the customer in order to assess its solvency (obligation to request information). (5) The purpose of the obligation to request information is not only to manage credit risk. It is also a way to take the economic security of the customer into account, in order to ensure the customer's repayment capacity. With regard to the type and size of the loan, the supervised entity shall aim to ensure that the loan management costs do not grow out of proportion as a result of changing conditions (eg due to changes in customer economy and loan reference rate). (6) In addition, the supervised entity shall follow standard 4.4a on management of credit risk and standard 2.4 on customer identification and customer due diligence. 6.2 Collateral General (7) When entering into collateral contracts, the supervised entity must take the economic security of the collateral provider into account. (8) Particularly third-party collateral commitments should be individual, as a rule. However, general collateral commitments may be used on justified grounds. (9) The collateral provider should itself be allowed to influence whether individual or general collateral is provided. Binding (10) If general collateral is used, the supervised entity shall inform the collateral provider of, in particular, the legal meaning of the collateral and of the obligations covered by the general collateral. In addition, providers of third-party collateral shall particularly be informed of their rights to limit their responsibility. (11) In addition, other legally required information shall be disclosed to the collateral provider according to the Act on Guarantees and Third-Party Pledges

13 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) and the Commercial Code. Realisation of collateral and collection of payment from guarantor Justifications (12) If the supervised entity has to realise provided collateral or collect payment from a guarantor, it shall be executed as expediently and with as little inconvenience as possible to the parties involved. (13) The following principles can be followed, as a rule, if compliance with those principles does not jeopardise the position of the collateral holder: if debtor assets and external collateral/guarantees have been provided as collateral, the collateral provided by the debtor shall be realised first if the purpose is to use pledges or guarantees from several parties as collateral for the loan, an agreement can be made when the collateral is provided that the procedure for a possible realisation is decided by way of settlement; if the matter cannot be settled, the collateral holder may select the order of realisation unless otherwise provided in the legislation in realisation, account shall be taken of the size of the claim as compared to the value of the provided collateral in order to avoid the realisation of valuable collateral for a small claim securities provided as collateral shall, if possible, be realised in public trading or corresponding trading in another country in the realisation of collateral, particularly securities, possible customer requests concerning the realisation order shall be observed. 6.3 Deposits Obligation to provide information (14) The deposit banks shall provide their customers with sufficient information on deposit alternatives, key deposit terms and deposit costs. (15) Prior to entering into a deposit contract, sufficient information shall be disclosed to the customer on the contract terms. Information shall be provided at least on the following: interest rate alternatives and interest rate structure: if the deposit yield or interest rate has been tied to another instrument, such as a share basket or share index, the customer shall be informed of how the yield or interest rate is determined

14 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) if the contract includes maximum or minimum interest rate clauses, the customer shall be informed of their meaning bilateral contract termination clauses and, in the case of fixed term deposits, whether it is possible to terminate the contract before maturity and what fees and other expenses this would cause the customer all costs resulting from the contract taxation effects of the contract (eg taxation of interest or yield) possible withdrawal or other limits on the use of the account. Binding (16) The deposit bank shall inform its customers of the Deposit Guarantee Fund's protection of their assets, of other corresponding protection, and of changes in information provided earlier. 1 (17) If not otherwise agreed, an account statement shall be provided free of charge to the account holder once per calendar year. The account statement shall disclose information on all transactions completed since the previous statement Customers' right to basic banking services Justifications Justifications (18) Deposit bank customers are entitled to basic banking services as provided by law. 2 Deposit accounts, means of payment for the use of them, and payment services are typical basic banking services. Among other things, a deposit bank is obliged to open traditional deposit accounts to the public for general payment transfer. A deposit bank can only refuse to offer basic banking services on legally defensible grounds. The basis for refusal shall be disclosed to the customer unless otherwise provided in the legislation. (19) A deposit bank is only obliged to grant its customers such means of payment with which they cannot overdraw their deposit accounts (eg ATM or online payment cards). The bank is not obliged to grant its customers bank cards, as the bank, due to the so-called bank card guarantee, is responsible to retailers for its customers' bank card use. (20) The customer's right to basic banking services must not be undermined in practice through unreasonable and discriminating pricing or the like Means of payment (21) As regards means of payment, deposit banks shall particularly draw customers' attention to security matters. 1 See section 65m of the Credit Institutions Act. 2 See section 50a of the Credit Institutions Act.

15 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) (22) Customers should be offered the chance to set, for example, daily withdrawal limits as required. (23) It is important to emphasise that customers should be careful with their means of payment and their responsibility for the disappearance and misuse of online banking codes and bank and credit cards Cancellation of payments from deposit accounts Justifications (24) A deposit bank can cancel a payment order at the payer's request according to the Act on Credit Transfers. (25) Should a payment, due to errors by the payer, be credited to the wrong account and no longer be revocable as referred to in the Act on Credit Transfers, the receiving bank shall negotiate with the recipient about revocation of the payment. If the recipient refuses to reverse the payment, the receiving bank may, notwithstanding banking secrecy, disclose the recipient's contact information to the payer's bank, which may forward it to the payer. (26) The bank may correct its own spelling and calculation errors and other technically incorrect entries in the payment transfer even if the recipient's account has already been credited. The correction should be made as soon as possible after the mistake has been noticed. The account holder shall be informed of all errors and corrections without delay. An error may not be corrected through an overdraft without the customer's consent.

16 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 7 CODE OF CONDUCT FOR THE PROVISION OF INVESTMENT SERVICES [The standard will be supplemented later with provisions on investment services.]

17 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 8 REPORTING TO FIN-FSA (1) The standard requires no regular reporting to FIN-FSA.

18 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 9 DEFINITIONS Financial services refer to credit institution services [and investment services]. Credit institution services refer to products offered by credit institutions and other services than investment services (eg loans, deposits and payment transfers). Investment services mean investment services as referred to in the Investment Firms Act (eg securities brokerage and asset management). Customer complaints refer to customers' complaints in writing or in some other similar form (eg by ) concerning financial services provided by the supervised entity.

19 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 10 FURTHER INFORMATION Please find the necessary contact information in the list of Persons in charge, by standard, on the FIN-FSA website. Further information can also be obtained from FIN-FSA s.

20 FINANCIAL SUPERVISION AUTHORITY 2 Code of conduct until further notice services 2.1 J. No. 6/120/ (20) 11 OBSOLETE GUIDELINE Valid from This standard renders the following guideline obsolete: Guideline on the cancellation of payments from customers' accounts (102.4).