EBA欧洲银行-JC-DP-2014-02-PRIIPS-Discussion-Paper_114页_1mb

Summary of the Discussion Paper on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs)

Core Content

This Discussion Paper is part of the process to develop Regulatory Technical Standards (RTS) under the Regulation on Key Information Documents (KIDs) for Packaged Retail and Insurance-based Investment Products (PRIIPs). It outlines the ESAs' (European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority) initial thoughts and seeks stakeholder feedback to improve the clarity, quality, and comparability of information provided to retail investors in the EU.

The Regulation aims to ensure that retail investors have access to clear and comparable information about complex investment products. It separates political decisions (level one) from technical implementation (level two), with the ESAs empowered to develop RTS for the latter.

Main Sections and Key Points

1. Introduction

• Purpose: To gather initial views from stakeholders to assist in the development of RTS.
• Scope: Applies to manufacturers and advisors/sellers of PRIIPs.
• Key Principles:
  • KID must be no more than three pages long.
  • Written in plain language to avoid financial jargon.
  • Available in the language of the retail investor.

2. Key Questions and Criteria for Assessing Options

• The paper explores various options for the structure and content of the KID, focusing on the most challenging areas.
• It emphasizes the need for clarity, simplicity, and usability for retail investors.

3. Risks and Returns

• Challenges: Retail investors often struggle to understand and compare the risks and returns of PRIIPs.
• Key Risks Identified:
  • Market risk
  • Credit risk
  • Liquidity risk
• Approaches to Performance Scenarios:
  • 'What-if' scenarios
  • Probabilistic scenarios
• Considerations:
  • Aggregation of risks may help but could also reduce the quality of information.
  • Use of visual aids like tables or graphs is proposed to enhance understanding.

4. Costs

• Key Issues:
  • Identifying and quantifying individual costs.
  • Aggregating these costs to produce a 'total aggregate costs' figure in both percentage and monetary terms.
• Challenges:
  • Comparing different cost structures.
  • Understanding how costs apply in practice.
• Proposed Approaches:
  • Simple indicators or summary figures.
  • Use of benchmarks.
  • Lifecycle cost impact analysis.
  • Consistent assumptions for cost aggregation to ensure comparability.

5. Other Sections of the KID

• Chapter 5 outlines provisional ideas and possible options for the other sections of the KID.
• These sections are not as complex as the risk and return or cost sections, but they are still important for providing comprehensive information to investors.

6. Products Offering Many Options

• Certain PRIIPs offer multiple investment options, making it impractical to fit all information into three pages.
• A specific derogation in the Regulation allows for alternative KID formats in such cases.
• This chapter explores when and how this derogation might apply.

7. Review, Revision and Republication

• The RTS will address the conditions for reviewing and revising the KID.
• It will also specify the circumstances under which a revised KID must be provided to retail investors.

8. Timing of Delivery

• The KID must be delivered to the retail investor in good time before entering into a contract.
• The timing is subject to its own RTS.

9. General Aspects of the KID

• The KID should be a 'consumer-friendly' document.
• The use of common templates and plain language is emphasized.
• The development of overall templates is considered important for consistency.

10. Impact Assessment

• The ESAs will conduct an impact assessment to evaluate the effects of the proposed RTS.
• Consumer testing is a key part of this process to assess the effectiveness of different KID formats.

Who Should Read This Document?

• All relevant stakeholders, including:
  • Manufacturers of PRIIPs
  • Distributors of PRIIPs
  • Advisers and sellers of PRIIPs
  • Consumer organizations
  • Trade bodies

Next Steps

• Consumer Testing: Will be conducted in autumn 2014 to August 2015.
• Technical Discussion Paper: Expected in spring 2015.
• Consultation Paper: Anticipated in autumn 2015, setting out draft RTS.
• Final RTS: Expected to be published in December 2016, with a 36-month implementation period.

Scope of the PRIIPs Regulation

Conclusion

The Discussion Paper outlines the ESAs' initial thinking on the development of KIDs for PRIIPs, focusing on risk and return, costs, and other sections. It emphasizes the importance of clarity, consistency, and consumer-friendliness in the KID format. The process includes stakeholder consultation, consumer testing, and the development of technical standards to ensure that retail investors receive clear and comparable information. The final RTS is expected to be published in 2016, with a 36-month implementation period.