Recent developments in European Consumer Law: Towards an EU financial competence framework: will it work?
Following a recent study of FISMA on the development of a financial competence framework for the EU, in April 2021 the EU Commission (DG FISMA) and the OECD International Network on Financial Education announced that they will jointly develop the framework for the EU. The project is part of the EU capital markets union action plan (on which we reported here) where the commission promised to raise trust in EU capital markets by improving financial literacy.
The study defines a financial competence framework for individuals as ‘a document outlining
key areas of competence pertaining to personal finance (for instance; planning a budget,
investing, borrowing and preparing for retirement), and within these categories, specific
levels of proficiency.’ The study starts from the premise that financial literacy is very important for one’s financial wellbeing and is becoming increasingly essential for our everyday lives, especially following the current pandemic that resulted in less intermediation and financial advice. Needless to say, the European levels of financial literacy remain low and show variations between the Member States and groups of the population. Although there are existing financial competence frameworks that cover key areas such as budgeting and planning, payments and spending, borrowing, as well as risk management and investing, there are considerable differences among each
other and a number of Member States do not have any.
The EU financial competence framework will cover the knowledge/awareness,
skills/behaviours and confidence/attitudes/motivation that individuals need to develop
and display in order to support their financial well-being throughout their lives. It will be similar for instance to existing language proficiency frameworks that start with a basic A1 level and ends with a C2 level.
It will be made available for voluntary uptake
in the EU by public authorities, private bodies, and civil society to develop policies and
educational tools and to assess their effectiveness: It could also provide a basis for public authorities and private bodies to design
learning materials and tools for educational purposes for youth and adults.
In particular, these could support the inclusion of financial education in
curricula in schools, universities, and vocational education institutions in
Member States and inform the design of teacher training. The framework could also underpin the setup of awareness-raising campaigns
or financial education centres (public or private), and could support the development, implementation and
update of national financial literacy strategies.
The initiative certainly sounds very interesting and perhaps necessary. There are many questions around how and whether the initiative will work, given that the current efforts resulted that on average,
adults have major gaps in understanding basic financial concepts. Therefore, in taking these initiatives one must not forget that financial education and financial literacy should not be replacing a high level of consumer protection.