Central Bank of Cyprus (CBC) directorate-general of financial stability and resolution head Panayiota Karamanou has highlighted the need to strengthen investor confidence as a key pillar of the Savings and Investment Union (SIU).

The Savings and Investment Union initiative aims to mobilise Europe’s significant savings and channel them into productive investment opportunities for businesses and households.

In an article published in Eurofi magazine, Karamanou explained that while the Financial Literacy Strategy seeks to improve citizens’ knowledge and resilience, previous efforts across EU member states have had limited impact on retail investment participation.

She argued that this indicates the challenge facing the SIU is not purely educational but also behavioural in nature, requiring deeper structural changes.

Survey data supports this conclusion, with Eurobarometer 2023 findings showing a weak link between financial knowledge and actual investment activity.

For example, the Netherlands, which ranks highest in financial knowledge, reports investment participation at around one fifth of respondents, while Malta, with mid-level knowledge, records participation closer to one third.

This suggests that understanding financial products does not automatically translate into investment behaviour, underscoring the need for additional drivers.

Karamanou identified trust as the missing transmission channel, noting that around 45 per cent of Europeans lack confidence that investment advice is provided in their best interest.

In countries affected by past crises, including Cyprus and Greece, confidence is even lower, with only around 20 per cent of respondents expressing trust.

The issue has long been recognised at EU level, with the European Commission identifying lack of trust as a key barrier in the 2020 Capital Markets Union Action Plan.

This diagnosis led to the Retail Investment Strategy proposal in 2023, which aims to improve transparency, comparability and investor protection.

Karamanou emphasised that the broader significance of the strategy lies in its behavioural impact, as it seeks to make investing safer, fairer and more transparent, thereby building confidence among retail investors.

She highlighted the role of financial conduct supervision in converting knowledge into action, stressing that alignment between advice and client interests is essential.

“When advice is demonstrably aligned with clients’ interests, costs are transparent and outcomes comparable, confidence increases,” she said.

Conversely, she warned that even well-informed consumers may avoid markets if experiences appear inconsistent or unfair.

Karamanou also stressed the importance of consistent conduct standards across the EU, which can serve as both a consumer protection mechanism and a driver of increased participation.

Another key factor is the visibility of investment outcomes, which can be enhanced through common indicators such as complaint ratios, suitability assessments and realised net returns.

She explained that confidence grows when savers can see that similar investors receive comparable outcomes across different intermediaries and jurisdictions.

The article further highlighted the importance of expanding investable opportunities, noting that many small and medium-sized enterprises remain unfamiliar with equity financing and EU investment tools.

Strengthening financial capability among SMEs would increase the pool of investable firms while also supporting retail participation.

Karamanou pointed out that fragmentation of financial literacy initiatives across institutions weakens their effectiveness, as multiple bodies run parallel programmes with overlapping objectives.

These include the European Commission, the OECD, the European Supervisory Authorities and national committees, alongside additional measures introduced under the Retail Investment Strategy.

She argued that greater coordination is needed to ensure coherent and consistently delivered financial education efforts across member states.

In addition, she highlighted the role of incentives in supporting participation, warning that differing national tax treatments continue to fragment the market and discourage cross-border investment.

Greater comparability and portability of long-term investment incentives would strengthen the EU’s single market and create more equal conditions for investors.

Karamanou also pointed to digitalisation as a tool to scale participation, with platforms able to simplify access, provide guidance and improve comparability.

However, she cautioned that digital channels can amplify mistrust if conduct standards are not aligned across jurisdictions.

Aligning digital practices with consistent rules is therefore essential to ensure that technology reinforces rather than undermines confidence.

She further stated that a broader ecosystem is required to move from financial literacy to active participation, combining knowledge with trust, fair conduct, incentives and accessible markets.

“The Savings and Investment Union (SIU) will succeed not when Europeans simply understand investment, but when participation becomes stronger, consistent, comparable and a genuinely worthwhile experience across the Union,” she concluded.