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

    EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms

    EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9.

    January 16, 2020 WebPage Regulatory News
    News

    FDIC and OCC Issue Statement on Heightened Cyber Security Risk

    In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk.

    January 16, 2020 WebPage Regulatory News
    News

    BCRA Updates Regulation on Capital Requirements and Information Regime

    BCRA updated the rules on minimum capital requirements for financial entities and on certain aspects of the information transparency regime for quarterly and annual supervision.

    January 16, 2020 WebPage Regulatory News
    News

    BoE and FCA Outline Next Steps for LIBOR Transition in 2020

    BoE, FCA, and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have published a set of documents that outline the LIBOR transition priorities and milestones for 2020.

    January 16, 2020 WebPage Regulatory News
    News

    BIS to Expand Central Bank Membership

    BIS is to expand its central bank membership base and to increase collaboration in its work as a forum for international cooperation and as a hub for central banks and other financial authorities.

    January 14, 2020 WebPage Regulatory News
    News

    EIOPA Issues Technical Specifications for Market and Credit Risk Study

    EIOPA published the technical specifications, including instructions, for the market and credit risk modeling comparative study for year-end 2019.

    January 13, 2020 WebPage Regulatory News
    News

    FED Publishes FAQs on Tailoring Rules for Banks

    FED released a letter announcing the publication of an initial set of frequently asked questions (FAQs) in response to questions from institutions.

    January 13, 2020 WebPage Regulatory News
    News

    IA of Hong Kong Publishes Stress Testing Scenarios in Relation to ORSA

    IA of Hong Kong published the prescribed scenarios for stress and scenario testing to be used by the authorized insurers conducting general insurance business.

    January 13, 2020 WebPage Regulatory News
    News

    ISDA Paper Examines Legal Aspects of Smart Contracts Using Blockchain

    ISDA published a paper that discusses legal aspects of smart derivatives contracts that use the distributed ledger technology (DLT), which is also commonly known as the blockchain technology.

    January 13, 2020 WebPage Regulatory News
    News

    FDIC Letter on Submission of Call Reports by End of January 2020

    FDIC, in a letter to financial institutions, announced that the Consolidated Reports of Condition and Income (Call Reports) for the December 31, 2019 report date must be submitted to the Central Data Repository of the relevant US agencies by January 30, 2020.

    January 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4495