Value for Money, Money for Value?
Living in Europe, is an expensive business. Saving up for retirement, or insuring your life, might be unaffordable soon. You might be able to afford the premiums, but will you ever get the payout?
We know that the European regulators are stating that they focus on protecting consumers, as a priority. At the same time, it seems, great focus is placed on protecting unrealistic investments in government-issued debt.
The contradictions are striking. EIOPA seems to desire protecting all consumers in Europe against losing all there savings to unscrupulous asset managers, whilst at the same time, allocating ‘risk free’ status to the government debt of European governments deemed to be less than ‘risk free’.
Risk, rather than risk-free, is not an easily defined concept. Risk-free, is rather more easily defined. Something which is risk-free, carries no risk. That is easily understood by market participants, and highly educated regulators alike. To define an investment in a football bet as ‘risk-free’ might seem foolish – but EIOPA seems to be willing to take a similar bet.
EIOPA is aiming to promote ‘transparency, simplicity and fairness’ to European consumers, whilst at the same time ensuring that investments in risky debt, issued by ‘slightly’ risky governments in Europe, carry an implicit risk-free status within the proposed EIOPA regulatory framework.
This is intellectually a very challenging argument, and will require some extensive academic reasoning. It will be impressive to see academic papers confirming this approach being produced by EIOPA in the next few months – given their past performance. It should be noted that past performance is certainly not an indicator of future achievement. We may yet be pleasantly surprised.
The full release of Gabriel Bernardino’s very thought-provoking speech can be found here:
https://eiopa.europa.eu/fileadmin/tx_dam/files/Press-Room/speeches/2012-12-04_Consumer_Strategy_Day_Speech.pdf
