GENEVA (Reuters) - Governments intent on steadying the troubled financial sector must do more to protect consumers by safeguarding retail banks and savings accounts, a consumer group said on Wednesday.
Responding to new banking initiatives from Washington and Brussels, Consumers International said that lawmakers needed to make sure that opaque banking operations were culled in any remedy for the world’s credit woes.
“A viable fix for the global economy must include greater regulatory oversight of a far more transparent banking industry,” the group said. “The system is simply too complex at present and needs regulatory intervention to remove incomprehensible financial products and services.”
Consumers International is an umbrella organization for 220 consumer groups worldwide and has in the past focused on such issues as junk food labeling and how to dispose safely of old computers.
Consumers International senior advisor Robin Simpson said the lobby decided to look at the banking sector in part because so many people had lost their savings in the global financial crisis or had fallen prey to unsupervised mortgage dealers or fraudulent funds.
“We are all susceptible to the faults in the financial system,” Simpson said in a statement. “Better law, as well as better understanding, is needed.”
Consumers International said it was essential that retail banking services, which include savings and checking accounts, were preserved and that deposits were shielded from further trouble in the stressed banking sector, where credit remains constrained.
It said that countries should also make sure the mega-banks resulting from a series of emergency mergers and acquisitions do not restrict consumer choice, and continue to provide loans in a fair way to both individuals and cash-strapped public utilities.
“The current seizure of bank activity is denying millions of poor consumers access to basic bank account services and starving critical public utility development of investment. This is of particular concern in the developing world,” the consumer group said.
The group demanded that taxpayer bailouts come with mandatory obligations to provide basic banking services to consumers and investment in major social infrastructure projects.
Earlier this month, the Obama administration announced new financial policing powers for the U.S. Federal Reserve, the most far-reaching changes in U.S. oversight since the 1930s.
EU leaders last week agreed to create a new system of financial supervisors to avert a repeat of the banking crisis, which erupted after years of easy credit encouraged banks and investors to take undue risks.
The statement comes before the start of a United Nations conference this week in New York on the financial system meltdown.
Editing by Jonathan Lynn and Karen Foster