In October we reported on a first in European regulatory process: the European Parliament rejected the Regulatory Technical Standards (RTS) essential to put the flesh on the bones of the “PRIIP KID”. Subsequently, we informed readers that the rules were being revised by the European Commission and the European Supervisory Authorities (the ESAs) and that, after much political speculation, the Commission had formally announced a delay of one year to the implementation deadline. The New Year brings a further twist: the ESAs do not agree on the proposed revisions to the RTS.
The date for implementation of the Key Information Document (KID) for Packaged Retail Investment and Insurance-based Products (PRIIPs) is now in line with the revised deadline for MiFID II of January 2018. However, the hope of a full year for product manufacturers to develop, test and produce thousands of KIDs has again been dashed.
In the light of the European Parliament’s concerns about the RTS first proposed by the ESAs and the Commission, the Commission informed the ESAs of its intention to amend the rules on the performance scenarios methodology, the use of the fourth scenario, the comprehension alert and Multiple Option PRIIPs (MOPs). After further discussion, the ESAs responded to the Commission, expressing concern that the Commission’s proposed change to the performance scenario methodology would result in the moderate scenario showing zero or negative returns for all PRIIPs. Moreover, EIOPA did not agree with the changes in relation to the treatment of MOPs, the criteria for determining whether a comprehension alert should be included, or the credit risk mitigation factors for insurers.
Once again, there is an impasse and the likelihood of the industry seeing final rules by the end of February seems remote. It is also of note that the discussions do not include changes to the methodology for computing costs or their presentation. The fund management industry in particular has consistently expressed concerns that the methodology for transaction costs will too often give rise to negative or overly inflated, and therefore misleading, figures. More generally, there is a series of practical questions from all three sectors that the ESAs promised last summer would be addressed by FAQs. These are still awaited.
Clearly, firms are not in the best position to progress implementation projects, but they must do so. Much of the original RTS are not being discussed and can be regarded as final. The deadline of 1 January 2018 is highly unlikely to change again.