13 November 2012

Risk.net: Structured Products Europe - PRIPs scope could be extended, says EC official

New European regulations on packaged retail investment products (PRIPs) should be agreed by legislators by the third quarter of next year, according to Tim Shakesby, seconded national expert, internal market and services, at the European Commission (EC). But a number of issues need to be resolved first – including the exact scope of the regulation.

Speaking at the Structured Products Europe conference in London this morning, Shakesby said... there has been some debate in both the European Parliament and Council of the European Union on whether the rules should be extended to cover all retail investment products, including shares, deposits, pensions and savings products.

"The view of the parliament is generally that it should cover everything, and I'm pretty sure that is where their report will be. They might concede on pensions, but certainly shares, bonds, whatever, should be covered under the same framework. And the council probably will be more focused on packaged products. So we will see how that develops", said Shakesby.

The liability issue is particularly problematic, Shakesby said. Essentially, legislators want to ensure there is some liability attached to the key information document (KID) required under the PRIPs rules. However, this could cause the KID to end up resembling a complex legal document, as product manufacturers look to cover themselves against litigation. "I would expect this to develop in the negotiation. I don't think the text of the commission will remain as it stands – this is one of the areas where there will be development. I would think the parliament will take a fairly strong line on this, as they want to see some liability attached. We have always been quite clear that there is a challenge here: when you are producing a communication document, if you attach too many legal consequences to it, then it becomes a legal document", he said.

"There is a degree of uncertainty in Brussels at the moment around all negotiations because of the banking union debate that is under way. This takes priority over everything, and so there is some uncertainty around the timing. But having said that, from an early view on the discussions, I would say a compromise would not be too difficult to achieve because it is a relatively consensual file and there seems to be a fair degree of political interest in achieving a compromise. So I would expect to have a position by the summer of next year."

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