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

    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
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417