Alessandra Perrazzelli: Ten years after the Alternative Dispute
Resolution (ADR) Directive - a comparative overview of banking and
financial ADR
Opening speech by Ms Alessandra Perrazzelli, Deputy Governor of the Bank of Italy, at
an international conference on Alternative Dispute Resolution schemes in the banking,
financial and insurance sectors, Rome, 19 December 2022.
* * *
It has been more than 13 years since the founding of the Banking and Financial
Ombudsman in October 2009, and I am delighted to open this international conference
on Alternative Dispute Resolution schemes in the banking, financial and insurance
sectors, which is a follow-up to a previous and important meeting held in 2017.
The Banking and Financial Ombudsman is an alternative resolution system for disputes
arising between customers (consumers and non-consumers) and intermediaries
concerning the provision of banking and financial services. The Bank of Italy was
tasked with setting up the ABF by the Government, supplying it with resources and
taking care of every aspect of its functioning, though obviously leaving the
decisionmaking to the members of the Panels in order to ensure and safeguard its impartiality
and independence.
The idea of establishing an Ombudsman actually goes back to the 2005 law 'on
savings'. The expectation that banks and other financial intermediaries would have to
join an alternative dispute resolution system for customers was therefore part of a
regulatory framework designed to strengthen consumer protection systems, and thus
also the protection carried out by the Bank of Italy, under the assumption that the
stability of the financial system as a whole and of intermediaries requires substantial
fairness in relations between intermediaries and customers.
Following the transposition of the European Directive on ADR (2013/11/EU), in 2015
the Bank of Italy was appointed as the national competent authority tasked with the
monitoring the proper functioning of the system and verifying compliance with the
quality requirements envisaged by the Directive.
There have been considerable changes since the ABF was founded, both in the Bank
of Italy, with the creation of a Directorate specifically devoted to consumer protection
(as well as to financial education), and in the ABF system.
Three Panels were set up initially in 2009, followed by a further four at the end of 2016
in order to increase the capacity for and the rapidity of responses to customer needs
and to step up consumer protection.
The Ombudsman has received over 210,000 complaints and adopted more than
200,000 decisions since it was founded.
The Panels awarded more than €150 million to complainants between 2015 and
2021.
The average time for processing a complaint, excluding suspension periods, has
fallen considerably and takes significantly less time than the civil justice system,
down from more than 300 days in 2015 to around 130 days in 2021.
The decisions of the ABF Panels are often referred to by the civil courts and when
cases are submitted to ordinary courts, the Ombudsman's rulings are almost
always upheld.
I don't want to take up too much of your time, so let's turn to the Conference: I would
like to look briefly at the topics under discussion today, all of which are very interesting.
I have had several opportunities to talk about the impact in Italy, like in many other
countries, of the spread of digital technologies in financial intermediation. Prior to the
pandemic, there had already been a steady growth in the use of alternative payment
systems to cash - especially cards - because of both rapid technological developments
and regulatory interventions to support payment efficiency and security. The revised
regulatory framework and the impact of the pandemic have given further impetus to the
spread of highly technological digital payment instruments.
The technological acceleration and the increase in competitive supply, in part owing to
the entry of new operators, has spurred traditional intermediaries to review their
business models and their strategic positioning in an ever more 'crowded' industry, by
testing new solutions and expanding their range of services to the benefit of the final
customer.
As Governor Visco pointed out a few weeks ago, the Bank of Italy is supporting the
digital development of the market according to the regulatory standards of security,
inclusiveness and transparency. Consumer protection, as well as the integrity and
stability of the financial system, is a crucial element in promoting this development,
ensuring that the strength and speed of the digital transition translate into benefits for
the economy as a whole and for its individual players: households, firms, investors and
general government bodies.
In this new ecosystem, characterized by the development of open banking and of
crypto-assets, consumer protection needs are evolving, and ADR systems are also
called upon to think about possible new paradigms for the forms of protection provided,
as is the case for the supervisory authorities in this sector.
The ADR Directive has enabled minimum levels of harmonization between countries to
be achieved: aligning it with the new context of reference will be an important response
to pressures from digitalization, and pursuing an international dialogue will be
fundamental (especially via the Fin-Net network of the European Commission that
connects the ADR systems operating in the banking, financial and insurance sectors
and is therefore an important forum for cross-border discussions).
The evolution underway also requires discussion between all the national competent
authorities, at both national level, thanks to the coordination board at the Ministry of
Economic Development and, as we said before, in international fora too.
Dialogue between ADR and the civil justice system is also very important (in Italy there
has long been a successful collaboration with the Scuola Superiore della Magistratura,
which I truly believe could be interesting at international level too).
A comparison of various ADR systems in terms of structure, operations and customer
care, but also of functions could provide some interesting insights. The international
situation increasingly shows that ADR entities perform important functions (apart from
resolving individual disputes): consultancy, financial education, data aggregation and
putting pressure on the market. Given the changes in the ecosystem, it is also
interesting to understand if and how these functions have evolved.
We are always on the lookout for new insights and trends arising from international
debate and are ready to intercept potential best practices to provide us with inspiration
(subject, of course, to internal regulatory constraints). We also firmly believe in the
exchanging of experiences (which now that the pandemic has eased, we have an
opportunity to promote).
The delicate topic of the effectiveness of ADR systems (a quality requirement set by the
ADR Directive) is particularly interesting. It will also be fascinating to see what is
surfacing from the latest academic debate on this and to understand how leveraging
technology, especially artificial intelligence applied to alternative dispute resolution
systems, could help to improve their effectiveness.
The ABF has made ample use of technology since it was founded: its procedures are
completely digitalized, and it has had a portal since 2018 that allows people to
communicate with the system online; work is underway to open the portal to
intermediaries as well to make the procedures even more efficient. The Bank of Italy is
experimenting with the use of artificial intelligence at the ABF: work is underway on the
AbefTech project that aims to apply machine learning and text analysis techniques to
help with the work of the Banking and Financial Ombudsman; this project follows a
similar AI tool (called EspTech) already implemented for managing the complaints
submitted to the Bank of Italy. Of course this in no way means that machines will
replace the 'judges', but we believe that it can improve the assistance given to the
Panel members in making decisions. Let's see what comes out of the debate, also
regarding the risks of potential errors or even biases in decisions that are partly
automated.
Lastly, another very important topic is the connection between the work done by ADR
systems and the work assigned to the supervisory authorities for consumer protection.
It will be interesting to understand and see how ADR systems can help to strengthen
the wealth of data available to the sectoral supervisory authorities when carrying out
their supervisory functions. I think some useful ideas will emerge here that we can
discuss together. We see the Ombudsman (together with the managing of customer
complaints) as a very important part of consumer protection, flanked by supervision (in
both its regulatory aspects and its interventions), and by financial education: dialogue
between these three different functions is fundamental. International debate can be
useful in identifying good practices in this area too.
I hope the challenges that ADR systems in the financial and insurance sectors will have
to tackle will also be outlined during the upcoming debate and that we can take away
some interesting ideas on the policies to be implemented. I am referring to the new
aspects of customer protection to be safeguarded in relation to the development of new
Fintech operators and smart contracts, the relationship between individual and class
actions, the regulation of an ecosystem that hosts different types of ADR, the growth of
cross-border complaints and the integration of the access channels of the various ADR
systems borrowing from some exemplary international experiences.
It only remains for me to 'formally' open the conference, and to greet and thank all the
participants. The floor now goes to the General Counsel of the Bank of Italy: Marino
Perassi.
Thank you all