Commission Delegated Regulation (EU) 2022/2118

Contents

THE EUROPEAN COMMISSION,Having regard to the Treaty on the Functioning of the European Union,Having regard to Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937,^note and in particular Article 6(7), thereof,Whereas:

(1)When investing in a portfolio of loans offered by a crowdfunding service provider, investors do not select the projects in which they will invest their funds, but rather select a number of parameters and risk indicators and leave to the crowdfunding service provider the task of allocating the funds accordingly. Therefore, the crowdfunding service provider should disclose appropriate levels of information to prospective and current investors, allowing those investors to have sufficient knowledge about the returns and risks of the projects and make informed decisions.

(2)In order to reduce the information asymmetry between crowdfunding service providers and investors, investors should be provided with all the relevant information about the composition of the portfolio, including the projects where their funds are invested, as well as the quality of the loans financing those projects. That should allow investors to better understand and compare the performance and riskiness of different portfolios, either offered on the same platform or on alternative platforms.

(3)Investors are exposed not only to risks connected to the projects or the loans in which their funds are invested, but also to the way the crowdfunding service provider assesses the risk of those loans and projects and how that provider manages the selection of loans for the portfolio. In that respect, performing stress tests on the portfolio and sensitivity analysis on the single loan and the single project owner can be particularly effective in providing a thorough and complete assessment of the investments. It is hence appropriate that, when the crowdfunding service provider performs such stress tests, the results of those analyses are disclosed to investors.

(4)In order to ensure effective transparency, the information about the elements to be included by the crowdfunding service provider in the method employed to perform credit risk assessments should be disclosed appropriately. That will allow investors to understand whether an adequate and prudential approach is taken by crowdfunding service providers in the process of assessing the sustainability of projects being financed, the affordability of the loans for the project owners, and the composition of the individual loans in a structured portfolio.

(5)A crowdfunding service provider may rely on a dedicated contingency fund to compensate investors for the losses those investors may incur in the event that project owners do not repay their loans. Investors will need to be made aware that the mere existence of such contingency fund does not provide a guarantee that the investment can be considered risk-free and that they will be reimbursed in the event that the loan they have financed is in default, as there is absolute discretion on the part of the crowdfunding service provider to decide on any payments. In order to ensure adequate investor protection, it is important that crowdfunding service providers have in place appropriate policies and governance arrangements when managing, either directly or through a third-party provider, contingency funds.

(6)This Regulation is based on the draft regulatory technical standards developed by the EBA in close cooperation with ESMA and submitted to the Commission.

(7)The EBA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council^note.

(8)The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 of the European Parliament and of the Council^note and delivered an opinion on 1 June 2022,

HAS ADOPTED THIS REGULATION: