Loans and investments could get “traffic light” labelling

by Gill Montia

Story link: Loans and investments could get “traffic light” labelling

A form of product labelling familiar from supermarket ready meals may be introduced for financial products.

In yesterday’s White Paper aimed at averting a future crisis in the banking sector, the Government revealed that it is considering using a “traffic light” system to improve the transparency of financial products.

Such a scheme would be compulsory rather than voluntary because providers might otherwise shy away from using it on complex or costly products.

Consumer groups would be involved in the development of the labelling and could help establish an accurate understanding of the public perception of phrases such as “low risk”.

The White Paper, which forms the basis of legislation expected to be in place early next year, also proposes that financial institutions pay their dues to the Financial Services Compensation Scheme up front, rather than relying on a Treasury loan to cover their commitments.