The three European regulators charged with bringing Priips into law have failed to agree on the proposed amendments to the directive.
The European Insurance and Occupational Pensions Authority, the European Banking Authority and the European Securities and Markets Authority are knows as European Supervisory Authorities and are collectively responsible for financial services regulation across Europe.
In a letter sent to the Commission before Christmas, Eiopa chair Gabriel Bernardino, EBA chair Andrea Enria and Esma chair and Steven Maijoor, said they “are not in a position to provide an agreed opinion on the amended draft regulatory technical standard”.
In November, the European Commission put forward suggestions on the redraft of parts of the RTS, to be made within six weeks.
The European Parliament voted in September to reject standards originally proposed by the Commission.
Despite reaching a consensus on a way forward, the ESAs, which need to ensure consistent application of the standards across all Priips products, did agree the Commission’s proposals for presenting performance data “raised comprehension issues and may be misleading”.
The letter states the performance scenarios should not show “overly positive expectations as to future returns”.
But the bodies also raise concerns about the credibility of the moderate performance scenario if this is either zero or taking costs into account, as this would instead indicate an expectation of losses through the recommended holding period.
It says: “The ESAs selected an approach in the original draft RTS using historic returns over a five-year period to allow for performance of asset classes, costs and product features to be readily reflected… The methodology in the ESAs’ original draft RTS was considered to be preferable.
“If the Commission nevertheless wishes to amend the RTS along the lines it has proposed, one option the ESAs considered was the use of the mean of the distribution of risk-free returns, adjusted for dividend yields.”
On 9 November, the Commission announced it was seeking a 12-month delay in the introduction of its Priips regulation.
As revealed by Fund Strategy’s sister title Money Marketing in October, the Commission had decided to delay the introduction of Priips by one year to January 2018.
The Parliament expects the Commission to draft a new delegated act on regulatory technical standards in 2017.
Law firm Ashurst says the Commission will now be “under pressure” to take on board the comments of the ESAs ahead of February, when no further public consultation on the text is allowed.
It states on its website: “This is a tricky position for the Commission to be in and is another chapter in the story of a regulation which has always struggled with the practical hurdles of achieving a harmonised framework for vastly differing products and sectors.”