Opening remarks by Angel Gurría, OECD Secretary-General
Paris, 19 May 2009
Dear friends, welcome to the OECD.
I am delighted to see such a large, exciting group of dedicated experts joining their efforts through the International Network on Financial Education.
Just a year after its creation, the Network now has over 230 members from 115 institutions representing 50 countries, which is well beyond the OECD’s membership.
This is great news. The Network’s rapid growth reflects the global trend of policymakers around the world waking up to the importance of empowering financial consumers. Consumers need to be better equipped to make good, informed and rational financial decisions.
Since the OECD issued its Recommendation on Principles and Good Practices for Financial Education and Awareness in 2005, we have been impressed by the many financial education initiatives launched by NGOs, the private sector and by small community groups. We have also identified numerous innovative approaches led by governments. These initiatives can inspire the whole international community.
The last couple of years have seen a remarkable multiplication of national strategies on financial education, most often being driven at the highest political level. Let me give you a few examples. In Mexico –my own country-, President Calderon, in 2007, called for co-ordinated public action on financial education. Last year, the United States launched the President’s Advisory Council on Financial Literacy. Indonesia dedicated 2008 to financial education. National strategies were recently launched in Hungary, Canada and Brazil where the next OECD international financial education event will be held later this year.
But more work needs to be done globally. The financial and economic crisis has further heightened the importance of financial education. This crisis is in large part a result of deficiencies in financial regulation and supervision, in liquidity and risk management by banks, and in banks governance, that led to excessive risk taking and threatened the solvency of many institutions. The proposed remedies to prevent future crises have largely been of a macro-prudential and corporate governance nature. These remedies make a lot of sense and I can assure you that the OECD is fulfilling its role as part of the reform process.
While macro-prudential and system-wide reforms are necessary, it is very important to remember that there is also a strong consumer aspect to the financial crisis, which, it seems, has not been given due attention.
Leading up to the financial crisis, far too many consumers acquired financial products that clearly were unsuitable for them; far too many consumers were easy targets for misselling; and as a consequence, far too many consumers are now finding themselves with problems that they could have, and no doubt would have avoided, had they been more financially capable.
If we consider the rapid pace of financial innovation, the growing complexity of financial products, and the increasing amount and size of financial risks and responsibilities transferred to households, the chances of the typical household successfully navigating the financial marketplace are slim; even more so for poorly informed individuals.
Yet, among the international efforts aimed at resolving the crisis and redefining financial markets, the OECD is one of very few organisations to explicitly recognize the importance of financial literacy and education as a necessary complement to reinforced consumer protection, and to call for concrete policy action.
As part of its Strategic Response to the Financial and Economic Crisis, the OECD is proposing to:
Evaluate the potential role of financial education and consumer protection as possible safeguards against similar market disruptions in the future;
Analyse the implications of the increasing transfer of financial risks to households;
Assess the role of financial institutions and intermediaries in consumers’ protection and awareness;
Develop further principles based on good practices in these fields.
Your input to the OECD’s work in this area is already paying off and is reflected in a significant OECD contribution to the global response to the crisis – the OECD Recommendation on Good Practices on Financial Education and Awareness Relating to Credit – which should be endorsed by the OECD Council in the coming days.
But even without this crisis, developments in financial markets, demographics, economic and policy changes are all pointing to the importance of financial education. Surveys of financial literacy continue to show that consumers in virtually every country lack adequate financial background or understanding and that they underestimate their needs for education.
Since 2003, the OECD has played a leadership role in nurturing global awareness on the importance of financial literacy. Last June at the OECD’s Ministerial meeting, I assured governments that the OECD would strengthen its leadership on financial education by addressing new trends, developing more guidance and further promoting the exchange financial education amongst OECD and non-OECD countries alike.
Our objective is to engage on these issues with countries around the globe. That is why we took the initiative to set up this Network.
It is critical that we coordinate our efforts to find ways to raise financial capability across our societies. And this is why I am so pleased to see this Network carry out its excellent work. Work which is important and beneficial to all financial education stakeholders around the globe.
I wish you all an excellent meeting.