EBA publishes crowdfunding standards

The European Banking Authority (EBA) has published its final standards for crowdfunding service providers. These include disclosing information to investors and governance arrangements. The standards follow the new rules harmonizing crowdfunding across the European Union (EU).

The EBA’s standards are submitted for approval to the European Commission, the banking watchdog says. The standards for crowdfunding platforms are in line with the long-awaited European Crowdfunding Service Provider Rules (ECSPR), harmonizing capital raising across the EU.

Investor information on credit scoring and pricing

According to the document, providers should inform investors about calculating credit scores, prices and interest rates of crowdfunding projects. In addition, it specifies a minimum set of common standards about ‘information to be considered in credit risk assessment and loan valuation and the underlying policies and governance arrangements’, EBA writes.

The information for investors needs to be ‘easily available’.

The information for investors needs to be ‘easily available in a dedicated section of the website’ and ‘presented in a way that is easy to read and expressed in a manner that facilitates its understanding.’

‘Investors may be exposed to risks’

“Investors using crowdfunding platforms may be exposed to the risk of having insufficient information, and/or incomplete understanding of the viability of a crowdfunding project or of the due diligence conducted by the crowdfunding service providers”, the EBA writes in its statement. “Therefore, it is important that adequate information is disclosed to investors on how credit scores are calculated, and crowdfunding offers are priced.”

The EBA aims for common standards without impairing own methodologies.

The document aims for due diligence according to a common set of standards, “(…) without impairing the possibility for each platform to develop their own methodology to assess the creditworthiness of project owners”, the watchdog adds.

European license

The EBA’s standards are meant to address some questions regarding the implementation of the new pan-European crowdfunding rules called ECSPR. These aim to harmonize capital raising across the EU.

Only this month, Crowdcube was the first platform to be approved under the ECSPR rules. To achieve this, platforms need to be regulated by an EU member state. Multiple platforms are currently working towards approval.