In a letter sent to the European Commission (EC) today, the European Supervisory Authorities (ESAs) mentioned that "the three ESAs are not in a position to provide an agreed opinion on the amended draft RTS".
After discussions among the ESAs and presenting an opinion to the three Boards of Supervisors, the opinion was adopted by EBA and ESMA Boards, but not by the EIOPA Board. However, there was general consensus of all three Boards that the European Commission's proposed amendments to the performance scenarios might be misleading.
The letter contains more background and also a suggestion in regards to the methodology to be used in the RTS.
Members of the European Parliament (MEPs) have voted this morning, by 561 votes to 9 with 75 abstentions, to delay the implementation of the Key Investor Document (KID).
MEPs have commented that European Commission's proposed methodology for the Regulatory Technical Standards is “flawed and misleading”.
The implementation date for the KID was postponed to 1 January 2018, which gives more time for the European Commission to propose alternative standards for the KID.
EU Parliament's Committee on Economic and Monetary Affairs (ECON) will hold a debate today in regards to the application date of the PRIIPs Regulation. Voting to be held on 1st December.
After multiple critics expressed during the last months by all responsible parties concerning the application of PRIIPS regulation, I was personally relieved to learn that the Commission eventually proposed significant changes in this new piece of regulation.
As a reminder, the strongest opposition against the initial position of the Commission was echoed by the European Parliament last September by a sort of „ totalitarian „ negative vote with respect to the proposed technical standards (RTS).
The Commission's new proposal was therefore critical in view of the strong negative vote of the Parliament; as far as I can read it now, it could lead to real improvement in PRIIPS products offerings.
First, the implementation date will be removed by one year till 1st January 2018.
Secondly, the Commission agreed to modify three controversial issues in the last draft for KIDs, including the publication of future performance scenarii. The new version will be submitted to the three European regulators and will then be submitted again to the European Parliament and the Council.
My reaction to the proposed changes is twofold; on the one hand, I applaud vigorously the change of application date, which will allow all actors of the industry to review quietly the revised rules and implement appropriate technical solutions; at the same time, they will have sufficient time to update, whenever necessary, their internal systems.
On the other hand, I would like to insist on two issues brought by the amended provisions of KIDs RTS. The first relates to the fourth so called “stress scenario“ linked to prospective performances, which is the concept now put forward by the Commission. I consider that this concept may only be acceptable, under the condition that appropriate explanatory wording accompanies it - which will be a very difficult exercise. Indeed, the presence of an extreme one way only scenario could wrongly give potential investors a biased message which would deter them to buy some PRIIPS products that are perfectly suitable for them.
The second issue I would insist on is the publication of past performance; I still consider this to be an essential piece of information for potential investors; it is also indispensable in giving the investor the possibility to compare investment performances with those of similar PRIIPS products.
A last remark on the timing: I welcome the Commission’s expectation that the application date of PRIIPS regulation being fixed on 1st January 2018 instead of 31st December 2017 as previously contemplated. This proposal would indeed align with the date of application of MIFID II / MIFIR. This alignment would avoid any time overlap between these two new essential pieces of European financial legislation
Marc Bayot, Chairman of PRIIPSHub
Marc serves and has served as independent Director of several leading asset managers.
Furthermore, Marc is honorary Chairman of EFAMA and emeritus Professor of Finance at the Free University of Brussels