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The Economic and Monetary Affairs (ECON) Committee of the European Parliament voted yesterday to object to the Level 2 Regulatory Technical Standards (RTS) of the packaged retail and insurance-based investment products (PRIIPs) Regulation. The Level 2 RTS provides detailed rules about the law that comes into force at the end of 2016.
In yesterday’s debate, members of the ECON Committee expressed their concerns about the current draft version of RTS. These focused in particular on the treatment of multi-option products, the costs treatment for insurance products and the methodology used to calculate future performance scenarios.
Although the motion passed with a majority (55 out of 58), the Committee vote does not constitute a formal rejection of the Level 2 measures. Formal rejection or objection can only take place in a plenary session of the European Parliament.
To avoid an objection vote, the European Commission was invited by the ECON Committee to seek a solution to the disputed points before the vote in the next European Parliament plenary session, which takes place from September 12 - 15, 2016. An objection vote would “only” affect the Level 2 RTS and the Level 1 regulation would still be in place.
Any amendment to the implementation date of the Level 1 regulation would need to be introduced by the European Commission by way of a new regulation in accordance with the ordinary legislative procedure.
Some of the European Commission representatives stated yesterday that they currently do not want to trigger this procedure. Without such a procedure, the regulation will not be delayed and will continue to adhere to the same timeline. However, the European Parliament agreed that the Level 1 Regulation and Level 2 RTS should enter into force at the same time, opening up some possibility of a delay in the event that no agreement is reached with the European Commission over the next few weeks.
Phil Lynch, Head Markets, Products & Strategy at SIX Financial Information said, “Today’s decision confirms the importance of the PRIIPs regulation on the European Parliament’s agenda. While the announcement introduces uncertainty around some details of how PRIIPs is implemented, it does not change the timeline or obligations of the Regulation. Financial institutions must still be ready to fulfil their obligations to produce and hand out KIDs to retail investors in the EU in time for the deadline of 31 December 2016. Based on the announcement, there is no rationale for any other course of action than to continue forward with compliance efforts. SIX Financial Information is closely monitoring developments to ensure we can offer appropriate guidance and clarity on what compliance means in the case of changing technical standards, and adapt our compliance offering as the situation evolves in the next couple of weeks.”
