A common approach to the implementation of KID Regulation

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On 06 July 2017, the European Supervisory Authorities (ESAs) have published their first set of questions and answers (Q&As) related to the Key Information Document (KID) requirements for Packaged Retail and Insurance-based Investment Products (PRIIPs) laid down in the European Commission Delegated Regulation (EU) 2017/653.

The Q&As are intended to promote a common approach to the implementation of the KID regulation and cover the following topics:

  • Market risk assessment;
  • Methodology for assessing credit risk;
  • Summary risk indicator;
  • Performance scenarios;
  • Derivatives; and
  • Methodology for the calculation of costs.

The Appendix of the Q&As provides useful examples of the calculation of standardised transaction costs.

The ESAs have indicted that they will continue to answer further questions submitted by stakeholders and will continue to publish those answers.

On 04 July 2017, the European Commission adopted interpretative guidelines on the implementation of the KID regulation. These guidelines aim to ensure a smooth implementation of the regulation by retail financial services sectors before its application on 1 January 2018 and avoid potential divergences throughout the Union.

The interpretive guidelines do not create new rules, rather it is another step taken by the Commission to make the complex investment environment more understandable for consumers, while increasing their protection and their trust in the financial services industry.