Substantial clarifications on PRIIPs regulation still needed

From a business perspective, the exemption of corporate bonds with common and well-established standards clauses from PRIIPs (Packaged Retail and Insurance-based Investment Products) is particularly important. On the national and European level, uncertainty about the interpretation of the regulation is still prevalent. Hence, BDI and BusinessEurope called upon the EU Commission for further clarification.

BDI and BusinessEurope urge for a quick clarification of the scope of the regulation. Businesses further propose an exemption of corporate bonds with usual and tried and tested clauses. This concerns especially so-called “make-whole-clauses” and other standard clauses; both have no negative effects on investors. They should not require corporates to generate a Key Information Document (KID) if sold to retail investors.

Roughly ten percent of corporate bonds are owned by small investors. Due to the huge uncertainty over application of PRIIPs and the costs of generating KIDs, legal sections often recommend to exclude small investors from investing into corporate bonds. Reducing an extensive prospectus into a three-page KID causes significant compliance and legal risks.

In a joint letter to the European Commission and the European Supervisory Authorities, BDI and BusinessEurope intervened and brought up their proposals. Industry needs transparency and certainty about the instruments of corporate finance. Therefore, BDI and BusinessEurope pleaded for the interpretation of the 2014 regulation in the light of the original intention to foster the EU priority of the Capital Markets Union (CMU). CMU can only become a success, if bonds remain an attractive financing method. Regarding the upcoming changes of the monetary policy including rising key interest rates, corporates bonds need to be more strengthened, not weakened by additional regulatory burdens.