Featured Product

    EBA consults on technical standards on crowdfunding service providers

    June 04, 2021

    EBA launched a consultation on the regulatory technical standards specifying the information that must be provided to keep investors appropriately informed about their risk exposure with respect to the individual portfolio management of loans. Article 6(7) of the European Crowdfunding Service Providers Regulation (ECSPR or Regulation 2020/1503) mandates EBA to lay out the draft regulatory technical standards for this purpose. The comment period for this consultation ends on September 04, 2021. Post which, EBA is expected to submit the final regulatory standards to EC in October 2021.

    The proposed regulatory technical standards specify the:

    • Information that crowdfunding service providers offering individual portfolio management of loans shall provide to investors in relation to the method to assess credit risk; the draft standards require crowdfunding service providers to show that the measurement techniques used for credit risk assessments are based on a sufficient number of elements and are appropriate to the complexity and level of the risks underlying the single project, the portfolio, and the project owners
    • Adequate policies, procedures, and governance arrangements that providers should have in place when managing, either directly or through a third party provider, contingency funds; this is because crowdfunding service providers may offer a dedicated contingency fund to compensate investors for the losses they may incur, in case project owners do not reimburse their loans
    • Information disclosures required with respect to several key characteristics of each loan included in a certain portfolio

    Crowdfunding risks may arise if investors underestimate the risks of their investment, assuming that every loan and project within a portfolio is subject to an adequate risk assessment process. Additionally, as crowdfunding is particularly relevant for small businesses and startups, often with little or no credit history, investors relying on these platforms may not be fully aware of the real quality of borrowers and may find it difficult to appreciate the risks involved for each of the loans in the portfolio. To avoid any misrepresentation of the underlying risk, the ECSPR makes it clear that the mere existence of these funds does not provide a guaranteed rate of return of the investment and that there is absolute discretion on potential refunds.

     

    Related Links

    Comment Due Date: September 04, 2021

    Keywords: Europe, EU, Banking, Credit Risk, Portfolio Management, Crowdfunding, Crowdfunding Service Providers, ECSPR, Regulation 2020/1503, Disclosures, EBA

    Related Articles
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News
    News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News
    News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News
    News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News
    News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938