24 October 2019

ESAs seek to promote consistent application of the PRIIPs Regulation to bonds

The European Supervisory Authorities have issued a Supervisory Statement in order to promote a consistent application by national competent authorities of the scope of the Regulation for packaged retail and insurance-based investment products to bond markets.

This Supervisory Statement of the European Supervisory Authorities (ESAs) seeks to mitigate the risk of divergent application by National Competent Authorities (NCAs) of Regulation (EU) No 1286/2014 (PRIIPs Regulation) as regards determining the type of bonds for which it is necessary to draw up a Key Information Document (KID).

The overall objective of this statement is to achieve a high, effective and consistent level of regulation and national supervision promoting a level playing field and the protection of retail investors.

In the view of the ESAs, uncertainty over the application of the PRIIPs Regulation to bonds, has led to negative consequences for the functioning of bond markets, and access to these markets by retail investors. It also risks divergent applications by NCAs with negative consequences for achieving uniform levels of retail investor protection and a level playing field amongst product manufacturers and distributors within the EU.

The ESAs’ assessment is based on the observations collected and analysis conducted by the ESAs and by NCAs in the European Economic Area (EEA) since the implementation of the PRIIPs KID at the start of 2018.

In order to promote a consistent application of the scope of the PRIIPs Regulation to bond markets, the ESAs recommend that NCAs apply the guidance set out in the Annex to this Statement when supervising compliance with the requirements in Chapter I of the PRIIPs Regulation. As part of their risk-based supervision, NCAs should monitor whether PRIIP manufacturers draw up and publish KIDs on their website for bonds that fall within the scope of the PRIIPs Regulation, and whether persons selling such bonds comply with the requirements in Article 13 of that Regulation. Where NCAs identify non-compliance with these requirements, they should take appropriate measures, including administrative steps in accordance with Chapter V of the PRIIPs Regulation.

Ultimately, in order to fully address the risk of divergent applications by NCAs, the ESAs recommend that during the upcoming review of the PRIIPs Regulation, the co-legislators introduce amendments to the Regulation in order to specify more precisely which financial instruments fall within the scope of the Regulation. We would also recommend to reflect more expressly the stated intention of the PRIIPs Regulation to address packaged or wrapped products rather than assets which are held directly, to avoid any legal uncertainty on this point.

Full press release on EBA

Full joint statement on EBA

© EBA