EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
Investors using crowdfunding platforms may frequently be exposed to the risk of having less information compared to project owners and/or an incomplete understanding of the viability of a crowdfunding project or of the due diligence conducted by the crowdfunding service providers. Therefore, the purpose of the draft regulatory technical standards is to reduce potential asymmetries of information between project owners, crowdfunding service providers, and investors with respect to credit scoring and loan pricing and to ensure a minimum set of common standards in terms of credit risk assessment, governance, and risk management structures. The final draft regulatory technical standards specify:
- information that crowdfunding service providers shall disclose with respect to the method used to calculate credit scores assigned to crowdfunding projects and prices of crowdfunding offers.
- factors that crowdfunding service providers shall take into account to ensure that the price of loans facilitated on its platform are fair and appropriate.
- information to be considered when conducting the creditworthiness assessment of project owners and crowdfunding projects.
- content and governance of policies and procedures crowdfunding service providers are required to have in place to ensure that investors are adequately informed and that credit risk assessment and loan valuation are conducted soundly and consistently.
The draft regulatory technical standards have been developed in accordance with the Article 19(7) of the European Crowdfunding Service Providers Regulation (ECSPR or EU Regulation 1503/2020), which mandates EBA to address the potential information gap between crowdfunding service providers and investors, through the disclosure of an adequate amount of information. The draft regulatory technical standards will be submitted to the European Commission for endorsement, following which they will be subject to scrutiny by the European Parliament and the Council, before being published in the Official Journal of the European Union.
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Keywords: Europe, EU, Banking, Crowdfunding Service Providers, Regulatory Technical Standards, Credit Risk, Lending, Loan Pricing, Credit Scoring, Disclosures, EBA, Lending Marketplace, Headline
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