EBA and ESMA clarifications regarding crowdfunding service providers and project owners


On 13 May 2022, the European Banking Authority published its final draft regulatory technical standards specifying (i) the information that crowdfunding service providers (the “CSPs”) shall provide to investors on the calculation of credit scores and prices of crowdfunding offers, (ii) information to be considered in credit assessment and (iii) policies and governance arrangements that should be in place (the “Draft RTS). It is based on Regulation (EU) 2020/1503 on European Crowdfunding Service Providers (the “ECSPR”).

The Draft RTS aim at assisting investors to make an investment decision with all the necessary information, notably on the creditworthiness of the project owners and on the crowdfunding project itself. In order to measure the profitability of the project, investors will be informed on (i) the method used for the credit scores attributed to the crowdfunding project, (ii) the prices of the offers and (iii) the pricing of the loans. Finally, investors will be able to ensure that the credit risk and loan evaluation have been conducted in a sound and consistent manner through policies and procedures put in place by CSPs.

CSPs provide accurate, reliable, and regularly updated information on a dedicated section of their website, different form the marketing communication section. They must describe (i) the method of the calculation of credit scores of crowdfunding projects, (ii) information and factors to be considered in credit scoring models, and (iii) the output of these scoring models.

CSPs shall have in place an adequate governance framework, including written governance arrangements, processes, mechanisms, and policies, which (i) are approved by the management body of the CSP and (ii) are intended to ensure the appropriate disclosure of a complete, updated and not misleading information to investors. Under the responsibility of the functions in charge of the risk management framework, CSPs also implement an adequate risk management framework to support robust and appropriate credit risk assessment and monitoring, credit approvals and loan valuation throughout the life cycle of a crowdfunding loan.

When CSPs undertake an assessment of the credit risk of crowdfunding projects or project owners, they assess the current and future ability of the project owner to meet the financial obligations established under the loan agreement. The Draft RTS sets forth information and factors to be considered by CSPs when assessing (i) the creditworthiness, (ii) the financial position, (iii) the business model and business strategy of the crowdfunding project. Furthermore, CSPs must provide information on credit protection arrangements, funded/unfunded credit protection and accounting information. They also maintain well-documented documentation thereon for a period of at least five years after the repayment of the final instalment of the loan.

The Draft RTS will be submitted to the Commission for endorsement, following which they will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union.

Furthermore, on 19 May 2022, the European Supervisory Markets Authority (the “ESMA”) released a final report on the possibility to extend the transitional period provided for by ECSPR (the “Final Report”). Currently, CSPs providing their services only on a national basis (the “National CSPs”) benefit from a transition period to join the regime set up by the ECSPR. As the transition period ends on 10 November 2022, ESMA encourages National CSPs to quickly apply to their competent authority for authorisation to provide their services under the ECSPR. ESMA also suggests to the European Commission to provide for an extension of the transitional period to National CSPs, which have duly applied for authorisation prior to 1 October 2022. The Final Report shall be submitted to the European Commission on 27 May 2022.

Finally, on 19 May 2022, ESMA updated its Questions & Answers (the “Q&As”) on the ECSPR. New Q&As pertain to (i) the clarification of the legal nature of the activity of individual portfolio management of loans, (ii) the need of a separate authorisation to hold transferable securities or admitted instruments for crowdfunding purposes offered on a crowdfunding platform, (iii) the organisation and the performance of payment services in accordance with Directive (EU) 2015/2366, (v) the recourse to tied agents, (vi) the establishment of a branch in another Member State and finally (vii) the role of crowdfunding service providers in relation to the drawing up and information contained in the key investment information sheet.

Should you have any questions on the above, please do not hesitate to contact one of our experts of the regulatory team.