Featured Product

    ESAs Respond to EC on Exclusion of Options in PRIIPs Consumer Testing

    August 07, 2019

    ESAs responded to EC about the exclusion of a few proposed options for presenting information on performance scenarios to be tested during a consumer testing exercise by EC under the Level 2 Review of the Regulation on key information document (KID) for Packaged Retail and Insurance-Based Investment Products (PRIIPs Delegated Regulation 2017/653). ESAs proposed the options on May 23, 2019 while EC informed ESAs, on July 19, 2019, that three of the proposed options will be excluded.

    ESAs consider that consumer testing can bring the best insights if a wide range of different approaches and options are first put on the table. The key points covered in the response include the following:

    • In relation to Option 4 for the structured product, ESAs disagree with the assessment that this option should not be included because it overlaps with Option 3. While the information is included as well in Option 3, the aim of Option 4 is to assess the effectiveness of showing only one set of performance information. Such an approach will be taken for other options that will be part of the testing. In addition, the discussions on developing the methodologies that would underlie the different performance scenario presentations are still ongoing. Therefore, ESAs think it is premature to reject this option at this stage on the basis that it is unclear who would define “what if” scenarios and is not consistent with the approach taken for other options that will be tested.
    • In relation to Option 5 for insurance-based investment products (IBIPs), ESAs recognize it will be important to further streamline options before finalizing proposals for the technical standards. However, this can be done better on the basis of the results from the consumer testing, rather than preemptively.
    • In relation to Option 6 for IBIPs, ESAs disagree that it does not give the right information and that it is not transparent to show an average past performance at different time periods rather than annually. For shorter-term liquid PRIIPs, communicating volatility can be most relevant. However, for longer-term products, the evidence is that investors do not respond to volatility and interim losses in a way that is in their best interests. This is a well-known issue of poor market timing by consumers and has long been a specific challenge in the context of retirement savings vehicles, where short-term volatility can lead to investors stopping their contributions prematurely or worse.

    Since ESAs continue to regard these as relevant options, the authorities are considering whether to include these options in an upcoming consultation paper, even if they are not part of the consumer testing, with the aim to receive feedback from external stakeholders, including consumer associations and their representatives. 

     

    Related Links

    Keywords: Europe, EU, Banking, Insurance, Securities, PRIIPs, KID, Consumer Testing Exercise, PRIIPs Regulation, IBIPs, Structured Products, ESAs, EC

    Related Articles
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462