JOINT ESA SUPERVISORY STATEMENT – APPLICATION OF SCOPE OF THE PRIIPS REGULATION TO BONDS

On 24th October ESAs issued a statement to promote consistent treatment of PRIIPs Regulation for bonds, given the differing interpretation in the market.

  • The statement includes supervisory guidance which NCA’s are recommended to apply (in respect of supervising Chapter 1 (which deals with scope) of the PRIIPs Regulation
  • The guidance offers indication of whether bonds with certain types of common features should be considered in scope of PRIIPs regulation or not
  • The statement also recommends amendments to the Regulation during the upcoming review to more precisely specify which instruments fall within its scope.

Of the common bond features included in the guidance:

Out of scope (of PRIIPs):

  • Perpetual
  • Subordinated
  • Fixed Rate
  • Step-Ups (not linked to a reference value or performance of an asset(s))
  • Bonds with direct links to an interest rate index (where no structuring is involved)
  • Puttable
  • Callable (where redemption is fixed)

May be in scope (of PRIIPs):

  • Callable (where redemption is not fixed and fluctuation is caused by exposure to a reference value.
  • Convertible

Click here for the full statement.