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

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    News

    BCBS Issues Climate Risk Principles while HKMA Expresses Its Support

    The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.

    June 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8280