Further uncertainty for PRIIPs KID implementation

Whilst the date of application for PRIIPs KID has been postponed to 1 January 2018, the discussion about the Regulatory Technical Standards (RTS) is still ongoing as indicated by a letter from the ESAs circulated on 22 December 2016. 

Following its announcement of the postponed application, the European Commission invited the European Supervisory Authorities (EBA, ESMA and EIOPA, together the "ESAs") to submit an opinion agreeing to certain proposed revisions to the RTS. The proposed revisions were to address concerns raised by Parliament in its rejection of the draft RTS, and covered:

  • The treatment of multi-option PRIIPs with reference to investments in UCITS and non-UCITS funds.
  • Performance scenario calculations due to concerns that the unfavourable scenario may be overly optimistic. 
  • Criteria to facilitate consistent use of the comprehension alert.
  • Changes in the presentation of insurance costs and benefits.

However, at the end of a six week review period, the ESAs announced in their letter that they have been unable to come to an agreed position on the proposed revisions. 

Disagreement of ESAs in three areas

Whilst two of the ESAs – EBA and ESMA – were prepared to support proposed revisions to the RTS, EIOPA was unwilling to agree, having concerns in particular in relation to the treatment of multi-option products, the criteria to determine whether a comprehension alert should be included in a KID, and the provisions in the RTS on credit risk mitigation factors for insurers.

In any event, all three ESAs agreed that the Commission's amended performance scenarios raised comprehension issues and may be misleading for certain product types. This reflects concerns expressed by industry generally that the solution proposed by the Commission is unsuitable and raises as many new issues as those it solves.

(Read the full letter by the ESAs.)
(Learn more about the details of the four areas under discussion.)

Unclear RTS publication date increases pressure on the industry again

This latest development introduces further uncertainty and the potential for further delay with regard to the RTS and is therefore unhelpful for the industry as institutions continue to await the finalised RTS (and level 3 guidance) as they prepare for PRIIPs KID implementation. As yet, it remains unclear as to how the Commission will take the RTS forward. Assuming that the Commission proceeds in the absence of an agreed opinion from the ESAs and submits a revised draft RTS to the Parliament and Council, there would be a further three-month period (which could be extended to up to six months) for Parliament and Council to review the revised RTS, though this could be reduced with agreement.

Whereas the 12 month delay of the PRIIPs Regulation was meant to provide market participants with more time to get ready for the complicated demands of the regulation, this latest development is very likely to reduce the available timespan. In addition, many firms already have a full slate for 2017 as they prepare for MiFID II. 

Both regulations have some commonalities with regards to Investor Protection, e.g. some of the data points reflected in the PRIIPs KID can be used by the distributor to perform suitability checks as part of MiFID II. Thus, a delay of the PRIIPs RTS may also influence preparations for MiFID II. 

SIX will continue to update you

SIX is closely following the developments regarding PRIIPs KID and will update you as soon as new information is available.

Need more information on PRIIPs?
> Go to our PRIIPs overview



Julian Chan, Media Relations

Phone:              +41 58 399 2508
Fax:                  +41 58 499 2710
E-mail:              pressoffice@six-group.com

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