The Consumers' financial capability: a regulatory perspective

With the growth of the financial markets, the higher level of markets complexity cause a need of an higher level of consumer’s financial capability. A market able to reduce the current gap in information and financial expertise between financial intermediaries and brokers would have the effect of reducing the risk of situations of tension (excessive indebtedness, default etc.) while, at the same time, increasing the level of competition between operators, and thus raising the overall efficiency of the market. The paper analyze the item from a regulatory’s perspective, taking care about the different approaches that the main european countries currently adopt about financial literacy. The analysis show an alternative choice between an “invasive approach” or an “information approach”. The objective of the work is to evaluate the advisability of a regulatory initiative designed to stimulate debtors’ perception of their own financial capabilities while identifying the directions in which to initiate a similar change. The proposal of an index of financial capability is addressed through a preliminary examination meant to identify the guidelines to be followed in selecting the information to be used inside of the index. The index of financial capability, therefore, is meant to aid the debtor in estimating his or her financial situation, and specifically in evaluating the impact that a (new) load would have on he initial situation. This work is meant to be a preliminary study, preparing the way for a more elaborate proposal on an index of financial capability.