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09 December 2021

EBA consults on draft technical standards setting requirements for crowdfunding service providers

The proposed requirements cover the method used for the calculation of credit scores and loan prices, the factors that the providers need to consider when carrying out a credit risk assessment and conducting a valuation of a loan, and the underlying policies and governance arrangements.

The European Banking Authority (EBA) launched today a consultation on draft Regulatory Technical Standards (RTS) specifying the information that crowdfunding service providers shall provide to investors.  The consultation runs until 8 March 2022.

Investors using crowdfunding platforms may frequently be exposed to the risk of having less information compared to project owners, and/or an 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 loans 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 draft RTS propose to require crowdfunding service providers to disclose the elements to be included in the information to investors with respect to the description of the method to calculate credit scores assigned to crowdfunding projects. The draft RTS also specify which are the elements of the pricing strategy that need to be provided to investors, and how to ensure that such pricing is indeed fair and appropriate. The draft RTS also require crowdfunding service providers to consider adequate amount of information when conducting the creditworthiness assessment of project owners and crowdfunding projects.

Finally, the 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.



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