The EU Crowdfunding Regulation takes effect today, and the European Banking Authority has issued draft Regulatory Technical Standards for the data that service providers must give to investors on credit risk assessment and each portfolio, plus requirements for any contingency fund. While implementation should be consistent throughout the EU, differences may emerge. If you have plans requiring advice in this area, please get in touch.
Investors are exposed to both the risks connected to the projects or loans they invest in; as well as the methods used by crowdfunding service providers to assess those risks and manage the selection of loans for the investor's portfolio.
The RTS requires crowdfunding service providers to show that its techniques for credit risk assessments are based on a sufficient number of elements and are appropriate to the complexity and level of the risks underlying the individual project, portfolio and project owner. They must also provide information on the key characteristics of each individual portfolio.
If a dedicated contingency fund is offered to compensate investors for losses, the crowdfunding service provider must have adequate policies, procedures and governance arrangements in place for managing the funds.
If you have plans requiring advice in this area, please get in touch.