Dominant European bancassurers who hold "considerable" influence over the European Commission (EC) are continuing to lobby against RDR-style changes in Europe.
Matt Connell, principal of government and industry affairs at Zurich Life, warns the European bank lobby could undermine the RDR and create a two-tier regulatory system in the UK.
The European Commission (EC) is currently holding its own review of packaged retail investment products (PRIPs), which follows the lead of the RDR.
However, Connell is concerned the power of the EU bancassurance lobby could have grave consequences for the RDR in the UK.
"The EC seems to be sympathetic to the ideals of the RDR and the proposed UK distribution model, but European bancassurers are lobbying hard against it," he says.
The EC is likely to introduce an RDR-style business model for Europe, but Connell is concerned there could be exceptions made for banks.
"Banks dominate product distribution in France and Germany, and they have a lot of power in Europe, and there remains a risk the EC will make an exception, allowing them to get away with lower professional standards and continuing to receive commission payments," Connell explains.
"The independent sector is relatively small in Europe, so the change would have little impact there, but there could be major consequences in the UK."
Such an exception could force the UK to conform to a two-tier system of regulation, with IFAs forced to comply with the existing RDR proposals, while bank advisers would face a more relaxed regime.
Connell says the FSA has been working closely with Europe to ensure its RDR plans are not scuppered by the EU lobby, but says the threat of a diluted RDR remains.
"The FSA began talking to the EC a lot earlier in the RDR process than with previous regulatory reforms, but the UK is so far ahead of Europe, where some markets have only just introduced voluntary disclosure rules, there remains a major risk of the plans being watered down."
Further details on the EC's proposals for PRIPs are due before the end of the year, though plans could be put back until 2010.
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