13 May 2022
The European Banking Authority (EBA) today published its final draft Regulatory Technical Standards (RTS) specifying the information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers. 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.
Investors using crowdfunding platforms may be exposed to the risk of having insufficient information, and/or incomplete understanding of the viability of a crowdfunding project or of the due diligence conducted by the crowdfunding service providers.
Therefore, it is important that adequate information is disclosed to investors on how credit scores are calculated, and crowdfunding offers are priced. Moreover, investors need to be sure that crowdfunding service providers are subject to a minimum set of common standards in terms of credit risk assessment, governance, and risk management structures.
Against this backdrop, these final draft RTS specify the information that crowdfunding service providers shall disclose with respect to the method used to calculate credit scores assigned to crowdfunding projects and prices of crowdfunding offers, and how to ensure that loan pricing is indeed fair and appropriate. The final draft RTS also specify the information to be considered when conducting the creditworthiness assessment of project owners and crowdfunding projects.
Finally, the final draft RTS propose what policies and procedures crowdfunding service providers are required to have in place to ensure that investors are adequately informed, and that credit risk assessment and loan valuation are conducted in a sound and consistent manner.
These draft RTS have been developed according to Articles 19(7) of Regulation (EU) No 1503/2020 (European Crowdfunding Service Providers Regulation – ECSPR), which mandates the EBA to develop, in close cooperation with the European Securities and Market Authority (ESMA), draft RTS 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).