The effect of informal measures
Behavioural change of is a result of many factors, including our formal and informal measures. The large number of factors involved makes it difficult to measure the effect. We can however give examples to demonstrate the effects of formal and informal measures. The AFM will continue to expand effect measurements as part of specific supervision projects and to monitor risks in specific areas of supervision.
Giving priority to customers' interests
Whenever abuses come to light that undermine customer confidence and compromise customers’ interests, the AFM calls the entire sector to account and demands that adjustments be made, if necessary. This may concern adaptations to specific products and services, or to underlying undesirable practices, such as the inappropriate use of asymmetrical information, framing and nudging, and taking advantage of low interest or inertia among customers combined with high switching costs.
Until recently, the AFM used its yearly Customer Interest Dashboard to measure the extent to which banks and insurance companies prioritise their customers’ interests.
The Dashboard has shown major improvements have been achieved over the past few years in multiple areas of supervision (borrowing, saving, investing, insurance). For example, ‘roof tile savings arrangements’ (where high initial interest rates are gradually but sharply reduced over time) have been banned, there is more transparency on investment costs, insurance claims settlement procedures have been improved and so has the quality of mortgage advice.
Comprehensive approach to ‘locked-up’ issues
In a ‘locked-up’ situation, consumers who had a revolving credit arrangement – often at a high interest rate and over-credited by current lending standards – were unable to switch to a different provider. The AFM pursued a comprehensive strategy to tackle this market-wide problem. This included discussions with over 40 market parties, ranging from providers and brokers to sector associations and other stakeholders. A large-scale campaign of informal influencing, involving the use of data, encouraged loan providers to introduce generic interest cuts, convert interest-only loans to loans with a repayment component, and tailor measures to specific cases (including an interest rate reduction and/or partial debt cancellation).
There has also been a shift from revolving credit towards personal (non-revolving) credit arrangements. As a result, the consumers concerned have regained the prospect of a future without debts. One loan provider was eventually fined for related violations. So we use informal influencing where possible, because it produces results more efficiently and across a broader spectrum, and formal enforcement measures where necessary, if parties fail to take sufficient steps in response to informal influencing and continue to cause damage.
One challenge during the period leading up to Brexit was to limit the risks in the rapidly growing market for Netherlands-based trading platforms. We did so by performing a strict gatekeeper role in the licensing procedure for the many new parties (even though they were already licensed in the United Kingdom). In collaboration with ESMA and other European supervisors, we clearly formulated the standard that we expect the market to comply with.
Sustainability and transparency in financial reporting
In 2021, an exploratory study by the AFM showed that the use of non-financial reporting information by investors and analysts remained limited. We discussed this with CFOs, supervisory directors, investors, auditors and other stakeholders. In this video we also explained what we expect from the chain.
MiFIR round table
Within the context of the MiFIR, the AFM held a round table discussion about the impact of the MiFIR transparency requirements on the bond markets. The purpose was to gain in-depth market knowledge following the advent of Brexit trading platforms, getting to know the stakeholders in this market segment and, obviously, to improve our understanding of how the transparency requirements work in practice. The round table was instrumental in organising the subsequent high-impact study on transparency in the bond markets. Many of the recommendations from that study were incorporated into the European Commission's MiFIR review proposal. In addition, following the round table we established fruitful contacts with several market parties.
Focus on ‘finfluencers’
The AFM has developed a comprehensive communication campaign to examine the growing phenomenon of finfluencers. The impact of finfluencers on retail investors is increasing, but they do not always obey the rules. Our exploratory study shows that several target groups played a role: the finfluencers, the investment firms and the followers. To reach them all, we deployed a wide spectrum of instruments, including this animation directly targeting the finfluencers’ followers on social media. The study also attracted extensive coverage in the national media. Some of the finfluencers were reached in a round table discussion (Dutch). For this group we also developed a web page (Dutch) featuring the rules governing posting content on social media.
Discussions about market abuse
Through the AFM STOR Desk we have increased the frequency and intensity of our contacts with market parties that are legally obliged to report cases of suspected market abuse. For example, we now organise periodic round table discussions with trading platforms and regular sessions with the major banks. We use those meetings to discuss and explain the standards.