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

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    HKMA Revises Implementation Schedule for Initial Margin Rules

    HKMA intends to adopt a revised implementation schedule for the margin requirements for non-centrally cleared derivatives.

    August 16, 2019 WebPage Regulatory News
    News

    HKMA Revises Guideline on Application of Banking Disclosure Rules

    HKMA issued a revised version of the Supervisory Policy Manual module CA-D-1 on guideline on the application of the Banking (Disclosure) Rules (BDR).

    August 16, 2019 WebPage Regulatory News
    News

    ECB Decision on Recognizing Reporting Member States Under AnaCredit

    ECB has finalized the Decision 2019/1348 (ECB/2019/20) that establishes procedure for recognizing non-euro area member states as reporting member states under the AnaCredit Regulation (EU 2016/867).

    August 16, 2019 WebPage Regulatory News
    News

    FASB Proposes to Extend CECL Standard Deadline for Certain Entities

    FASB proposed an Accounting Standards Update that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    IASB Adds Phase Two of IBOR Reform to Its Work Plan

    IASB (or the Board) has added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—interbank offer rate (IBOR) reform—to its work plan.

    August 15, 2019 WebPage Regulatory News
    News

    FED Updates Draft Instructions for Proposed FR Y-14 Reporting Forms

    FED updated draft instructions for the monthly, quarterly, and annual capital assessments and stress testing reports, also known as forms FR Y-14M, FR Y-14Q, FR Y-14A, respectively.

    August 15, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 326, 815, and 842

    FASB is proposing taxonomy improvements for the proposed Accounting Standards Update on clarifying the interactions among topic 321 on investments in equity securities), topic 323 on investments under equity method and joint ventures), and topic 815 on derivatives and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    OCC Updates Bank Accounting Advisory Series in August 2019

    OCC released an update to the Bank Accounting Advisory Series (BAAS), which reflects accounting standards issued by FASB, through March 31, 2019, on topics such as hedging and credit losses.

    August 15, 2019 WebPage Regulatory News
    News

    APRA Consults on Final Phase Margin Rules for Uncleared Derivatives

    APRA is consulting on amendments to the prudential standard CPS 226 on margin and risk mitigation requirements for non-centrally cleared derivatives.

    August 14, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3656