Yesterday evening, the Members of the European Parliament (MEPs) in charge of negotiating the detailed rules which aim at setting the PRIIPs regulation in practice, met representatives of the European Commission for further discussions. In this way, the two parties ensured that a constructive working process would go on, after the plenary of the European Parliament had rejected the key set of implementation rules to implement the PRIIPs regulation in September. Through this rejection the European Parliament issued a mandate to the Commission to review its original proposals.
The overarching objective of the negotiation parties was to discuss signposts to ensure for a better overview of the review and adoption process of the rejected implementation rules. In its proposals, the Commission took in account two key concerns of the European Parliament, which had also been crucial for the rejection of the originally proposed implementation rules. Firstly, the originally proposed future return projections for PRIIPs products, such as investment funds, were based on a methodology which often lead to over optimistic results, thereby misleading consumers. For the upcoming review, the Commission now proposes to introduce an additional and obligatory “stress scenario”, which aims at reflecting possible outcomes under extreme market conditions. Thereby, consumers would be provided with a clearer picture of what could happen to their investment, if strongly negative economic conditions materialise. Thus, this proposal effectively tackles the previously detected problem of over optimistic projections of future performance and will thus contribute to avoid misleading results for consumers.
Secondly, the European Parliament had criticised the lack of guidance for implementation of a “Comprehension Alert” for specifically risky products in the original proposals. The Commission now suggests for the upcoming review to include a set of criteria in the detailed implementation rules. This is a clear step ahead, since these legally well grounded criteria provide the basis for a more consistent implementation of the Comprehension Alert across the Single Market.
Moreover, the negotiation parties pointed out that they envisage the following steps to successfully conclude the implementation work of the PRIIPs regulation.
In order to to provide a robust framework and better orientation for consumers and product providers, the original application date of the PRIIPs regulation (31 Dezember 2016) should be postponed for twelve months. Against the backdrop of this enlarged framework, as a first step, the European Commission will send a letter to the European Supervisory Authorities to specify the changes, which the Commission requests for the review. This aims to take into account in the review work the reasons for the European Parliament’s objection as set out in the respective resolution from 14 September 2016. As a second step, Commission and European Supervisory Authorities could aim at concluding review work and adoption by the end of this year. As a third step, the European Parliament would scrutinise the updated version of the detailed implementation rules. Depending in how far the review takes into account the European Parliament’s concerns, MEPs could give green light to this update in Spring 2017. In order to complete this final step, the EU member state must also accept the revised implementation rules.
At the occasion of the meeting, the representatives European Parliament and Commission also followed-up on a key point of the European Parliament’s resolution: They highlighted their will to ensure that except the date of entry into force no other provision in the content of the PRIIPs regulation itself should be changed.
Yesterday’s discussion between European Parliament and Commission and revealed a strong commitment on all sides to make an effective contribution to the revision of the implementation rules as well as to a swift adoption process. The postponement of the application date of the PRIIPS regulation for twelve months would be a helpful basis for a proper implementation of the rules by product providers. This, in turn, can contribute to more beneficial key information document (KID) for consumers, more effectively revealing risks, benefits and costs of complex financial products .
Please find the previous communication on the rejection of the detailed rules to implement the PRIIPs regulation by European Parliament’s ECON committee here:
Please find the resolution which states the reasons for the European Parliament’s objection to the original implementation rules proposed by the European Commission (from 14 September 2014), here: