EBF adviser: Pauline Guérin
Publication date: 12 September 2019
EBF members welcome ESMA’s call for evidence on costs and charges and inducements which have been major changes to investor protection requirements and which have required heavy technical development for EU banks.
ESMA has so far produced Q&s on cost and charges disclosure on an ongoing basis. Most of these Q&As have gradually addressed the ex-ante disclosure, while very few Q&A have been released on the ex-post periodic disclosure. This approach proved challenging as:
- clarifications have been provided too late when intermediaries have already made very large investments to adopt their own procedures;
clarifications are fragmented and sometimes unclear or not applicable; - clarifications provided did not address the most important issues;
- any change to the procedures already implemented by intermediaries aimed at following the ESMA’s clarification provided from time to time requires proper planning which takes into account the related costs and implementation times.
At this stage, in case ESMA should decide to go on providing further clarification on this subject we strongly recommend the use of the Guidelines tool instead of the Q&As in order to:
- allow intermediaries to take part in the consultation process by making their own contributions (Q&A does not provide any prior discussion with the industry) based also on the experience gained in the implementation of these complex requirements;
- ensure a more organic and systematic approach to interpretation;
- allow the industry to plan the necessary further changes and the related costs.
The call for evidence focuses on the disclosure rules relating to inducements. We would also like to point out that many of the implementation challenges relating to inducements rather relate to other areas of the regime such as divergent legal interpretations by competent authorities regarding the “quality enhancement” regime, the principle of proportionality and application to primary market transactions. Whilst noting that the mandate to ESMA is restricted to disclosure, we would welcome a more extensive study on the impact of the inducement rules in MiFID II.
It should be noted that the industry (both manufacturers and distributors across EU) is heavily engaged in self-regulatory work through FinDatEx, under the governance of EU wide associations including EBF, to create a better standard and more harmonized framework for data exchange related to cost & charges and target market data. One of the consequences of the MiFID II cost & charges regime is that this has become a truly massive data exercise between manufacturers and distributors. This data exercise should be taken into consideration by the legislators and the regulators when setting out the rules. The industry’s self-regulatory work will take some time to finalize and implement, and the regulator should be aware of and should take this into consideration.
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]]>EBF advisor: Pauline Guerin
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Publication date: 17 January 2020
On behalf of the European banking sector, the EBF has submitted its comments to the European Supervisory Authorities (ESAs) on the consultation paper setting out proposed amendments to the Commission Delegated Regulation (EU) 2017/653 (PRIIPs Delegated Regulation).
The EBF welcomes the ESAs’ consultation. However, Contradictory, overlapping and complex disclosure requirements may discourage retail clients from investing in financial instruments. Therefore, the EBF considers that it is important to work in the context of CMU 2.0 in order to improve retail investors’ trust into financial markets for the benefit of companies looking for funding and for the investors’ long-term benefit. In fact, as advocated for in the Markets4Europe[1] campaign (a private sector initiative identifying both the obstacles to a deeper CMU and the required reforms leading to better integrated markets) the EBF believes that requirements relating to clients’ information should be reviewed as to be made more consistent and less overwhelming for clients. We believe that a higher quality of information should be favoured.
General comments
The EBF would like to raise number of concerns:
– The EBF welcomes the ESAs consultation on PRIIPS but wonders how this articulates with any level 1 change. The Level 1 revision should take place before any level 2 change in order not to double the implementation work and costs.
– The EBF supports further alignment between PRIIPS and MIFID
– The EBF supports that the amendments proposed in this Consultation Paper should be implemented at one point in time. However, it is important to ensure that investment firms are given sufficient time to adapt to the new rules, as they will require substantive changes to IT systems.
– The EBF welcomes the ESA statement from 24 October 2019 regarding the PRIIPs scope for bonds but it would welcome further clarification as to the intended scope on Level 1.
– The EBF believes that a more comprehensive consumer testing of the proposals should have been conducted, in particular regarding the cost & charges information.
– Though the aim of comparability of the PRIIP KID documents is desirable – the comparability should only be a priority for de-facto comparable products. For instance, investors do not compare OTC derivatives with investment funds and comparability at the cost of precision and adequate information should therefore not be the result.
– The EBF would like to make a general comment on the articulation between PRIIPS and UCITS requirements: in the case a UCITS KID is required, the EBF does not the support the idea of duplicating the requirements with a PRIIPS KID.
– The EBF would also like to underline the fact that all new requirements such as PRIIPS demand a high level of data information. The need for data increases in parallel with regulatory requirements which then lead to an increase of data costs.
[1] For more information, please visit https://markets4europe.eu/
For more information:
Pauline Guerin, p.guerin@ebf.eu
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Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
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The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
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