2012-07-24
Financial services providers will be obliged to inform about new products in advance and to assess their risk
Market participants intending to distribute new financial products or change already distributed products will be obliged to inform the supervisory authority, the Bank of Lithuania, about them. It is proposed to start the application of such obligation already this autumn. The draft legal act establishing the notification procedure was submitted for consideration to the associations of banks and other financial market participants.
“After establishing an obligation to provide information about newly marketed financial products, we will be able to monitor the development directions of the financial products market, assess whether financial market participants select appropriate tools for the management of risks related to a new financial product. If any doubts arise about suitability of a product for consumers, we will immediately recommend removing the ascertained violations and, if necessary, publicly warn consumers. Such cooperation with financial market participants will be used to ensure that high quality financial products are offered to consumers”, said Mr Vytautas Valvonis, Director of the Supervision Service of the Bank of Lithuania.
After the new procedure enters into force, it will be necessary to provide the information about investment products (for example, investment deposits, investment life assurance products, etc.), combinations of two or more products and services (for example, the combination of a housing loan and life assurance or non-life insurance, etc.), debt securities (bonds, certificates of deposit), which are not insured according to the Law on Insurance of Deposits and Liabilities to Investors, and crediting products.
The draft document defines the requirements for the information to be provided, including: information about financial assets associated with the product, target market or consumer group, distribution channels, planned sales volume. In addition, financial market participants will be required to provide the description of risks related to the new financial product by indicating the risks that arise not only to consumers, but also to financial market participants, and the planned tools for the management of the identified risks.
Market participants will have to submit their comments and suggestions regarding the prepared draft legal act, which was published on the Bank of Lithuania website, by 2 August 2012.
In the nearest time, the Bank of Lithuania will also draw up the supplements to the legal acts regulating risk management in credit institutions, insurance, financial broker and management companies. These amendments will be used to obligate financial services providers to assess the risks to consumers and the company itself efficiently and to establish appropriate process controls, when a new product is distributed.