Featured Product

    Gabriel Bernardino of ESAs Speaks About Work Related to KID for PRIIPs

    February 20, 2019

    While speaking in Brussels, at the Scrutiny Hearing of the ECON Committee of European Parliament, Gabriel Bernardino, the Chair of the Joint Committee of ESAs, provided an update on the work of ESAs in relation to the delegated acts on the key information documents (KIDs) for the packaged retail and insurance-based investment products (PRIIPs). He highlighted the importance of a KID in increasing the transparency and comparability of investment products through the issue of a standardized short form disclosure document.

    He mentioned that ESAs are committed to supporting an effective and convergent implementation of the rules as a variety of different national approaches to the KID will not help PRIIP manufacturers, distributors, or most importantly, consumers, particularly in the context of cross-border business. ESAs are also committed to reviewing the existing rules, where this is needed, so they can apply equally well to all different types of PRIIPs. ESAs have been examining the issues raised by stakeholders and are considering what to do. In some cases, questions and answers have been published to clarify technical points. However, it had been decided last year that the best course of action on some issues was to propose targeted amendments to the PRIIPs Delegated Regulation. Hence, a public consultation was issued in November last year, which focused on changes to the performance scenarios. Mr. Bernardino summarized some of the main themes that emerged from the public consultation.

    There is a consensus among stakeholders that the current performance scenarios in the KID should not be taken as best estimate forecasts, yet there is a risk that consumers read them that way. The proposals that ESAs made to strengthen the warnings in the KID were generally supported. However, it was stated that there are no “quick-fixes” that can be made to the performance scenario methodology and, therefore, it was suggested that ESAs should undertake a comprehensive analysis of alternative approaches. After taking into account the feedback received on the consultation it was concluded, as published in early February, that it was not appropriate to propose narrowly targeted amendments at this stage. However, immediate supervisory steps are needed to reduce the risk that the meaning of the current performance scenario figures is misinterpreted or there is undue reliance on them. Therefore, a joint ESA Supervisory Statement was issued to promote consistent approaches and improve the protection of retail investors prior to the conclusion of a fuller review.

    Mr. Bernardino added that, in the statement, ESAs recommend PRIIP manufacturers to include a warning in the KID to ensure that retail investors are fully aware of the limitations of the figures provided. The February publication also stated that a more comprehensive review of the PRIIPs Delegated Regulation will be launched this year; this publication set out the main areas of the rules that are intended to be addressed and include the following:

    • Issues related to performance and cost disclosures should be addressed. This will include assessing whether the transaction cost methodology and reduction in yield approach should be adjusted. ESAs will also draw on the analysis of KIDs during the work started last year to report on an annual basis on the costs and past performance of investment products.
    • Focus will be on possible amendments to the PRIIPs Delegated Regulation. However, where changes to the PRIIPs Level 1 Regulation are needed to achieve the optimal outcomes at Level 2, ESAs also intend to recommend such changes.
    • Given the very wide scope of the PRIIPs Regulation and to ensure that the KID works equally well for all products, some further differentiation in approach for different types of PRIIPs may be needed, while still adhering to the aim of comparability between substitutable products.
    • ESAs intend to conduct consumer testing, including both the existing KID and alternatives.

    Finally, he welcomed input from the Members of Parliament on how to improve the transparency and comparability of the KID, to make it work better for the consumers. He concluded, “…we welcome the confirmation that amendments to the PRIIPs Regulation will be made this year regarding the issue of the duplication of disclosures between PRIIPs and UCITS; some minor consequential adjustments to align the PRIIPs Delegated Regulation with the new deadline will also be needed. We now have the time to ensure the PRIIPs KID can work for all products, including UCITS… .”

     

    Related Links

    Keywords: Europe, EU, Banking, Insurance, Securities, PRIIPs, KID, PRIIPs Regulation, ESAs

    Related Articles
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.

    July 21, 2021 WebPage Regulatory News
    News

    BoE Announces Changes to Validation Rules for Form BTL

    The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.

    July 20, 2021 WebPage Regulatory News
    News

    BCBS Proposes Changes to Process for Reviewing G-SIB Methodology

    The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.

    July 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7281