The European Banking Authority (EBA) published on Friday 13 May the final draft of Regulatory Technical Standards (RTS) on equity crowdfunding platforms, specifying the information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers (see here the press release and here the entire document).
The final draft RTS also specify a minimum set of common standards with regards to information to be considered in credit risk assessment and loan valuation and the underlying policies and governance arrangements. Moreover the final draft of the RTS proposes what policies and procedures crowdfunding service providers must have in place to ensure that investors are adequately informed and that credit risk assessment and loan assessment are conducted in a sound and consistent manner.
All this is because, according to the EBA, investors using crowdfunding platforms may be exposed to the risk of having insufficient information and / or an incomplete understanding of the feasibility of a crowdfunding project or due diligence conducted by crowdfunding service providers. i in terms of credit risk assessment, governance and risk management structures.
The EBA’s intervention is envisaged by the new EU regulation 2020/1503 of the European Parliament on equity crowdfunding and lending platforms for companies Regulation (EU) no.1503 / 2020 (European Crowdfunding Service Providers Regulation – ECSPR), which obtained the definitive go-ahead from the EU Parliament in October 2020 (see here a previous article by BeBeez) which will come into force next 10th November.
More in detail, the draft RTS was prepared on the basis of Article 19 (7) of the ECSPR Regulation), which authorizes the EBA to develop, in close collaboration with the European Securities and Markets Autority (ESMA), and project to specify:
- the elements to be included in the information to investors with respect to the description of the method to calculate credit scores and pricing assigned to crowdfunding offers (Article 19(7)(a));
- the information and factors that crowdfunding service providers shall consider when carrying out credit risk assessment and when conducting a loan valuation, as referred in Article 4(4) (Article 19(7)(b));
- the factors that crowdfunding service providers shall take into account to ensure that the price of loans facilitated on its platform are fair and appropriate (Article 19(7)(c));
- the content and governance of the policies and procedures required for the requirement specified in Article 19 and the risk management framework related to credit risk assessment as referred in Article 4(4)(f).
