Calculation of the weighted average annual interest rate
1. For the calculation of the weighted average annual interest rate on loans in a portfolio as referred to in Article 6(4), point (b), of Regulation (EU) 2020/1503, crowdfunding service providers shall calculate the average, weighted for the outstanding amount of loans in a portfolio, of the annual interest rate of every loan of which the portfolio is composed.
2. In order to calculate the weighted average annual interest rate referred to in paragraph 1, crowdfunding service providers shall ensure all of the following:
(a)
that the denominator consists of the sum of the notional amount of every loan included in the portfolio;
(b)
that the numerator consists of the sum of the products of:
(i)
the notional amount of every loan;
(ii)
the annual interest rate of every loan included in the portfolio.
3. For the purposes of paragraph 2, point (b)(ii), the annual interest rate shall correspond to any of the following:
(a)
in the case of a fixed interest rate, the annual interest rate as laid down in the loan contract;
(b)
in the case of a variable interest rate, the interest rate in force at the time of the publication of the weighted average annual interest rate, taking into account any upper limit as laid down in the loan contract;
(c)
in cases in which the loan is split into tranches earning different interest rates, the weighted average of the interest rates as laid down in the loan contract.
Distribution of loans according to risk category
1. For the calculation of the distribution of loans according to risk category, in absolute numbers and as a percentage, as referred to in Article 6(4), point (c), of Regulation (EU) 2020/1503, crowdfunding service providers shall ensure that each individual loan is assigned to the relevant risk category set out in the risk management framework on the basis of sound and well-defined criteria, as referred to in Article 4(4), point (f), of Regulation (EU) 2020/1503, and as specified in accordance with Article 19(7), point (d) of that Regulation.
2. For the purposes of paragraph 1, and for each risk category, the following definitions shall apply:
(a)
the distribution of loans according to risk category in absolute numbers shall refer to the sum of the notional amount of every loan in the same risk category;
(b)
the distribution of loans according to risk category as a percentage shall refer to the ratio between:
(i)
the sum of the notional amount of every loan in the same risk category;
(ii)
the total notional amount of all loans within the portfolio.
3. For the disclosure of information to investors, crowdfunding service providers shall establish and maintain clear and effective policies and procedures for the specification of the risk categories.
Key information for every loan included in the portfolio
1. The key information for every loan of which a portfolio is composed referred to in Article 6(4), point (d) of Regulation (EU) 2020/1503 shall contain all of the following:
(a)
the amount of the loan, including the most recent outstanding balance;
(b)
the currency in which the loan is granted;
(c)
the entity responsible for the servicing of the loan, including its legal name, registration number and place of registration, registered office and contact details, and its servicing policy;
(d)
the identity of the project owner, including indicating its legal name, the country of incorporation and registration number, the address of its registered office and its corporate website;
(e)
the ownership structure of the project owner;
(f)
the purpose of the loan, by adding a brief description of the crowdfunding project;
(g)
the interest rate or any other compensation laid down in the loan, for each year until maturity, and where the interest rate or any other compensation is not directly available, the calculation method;
(h)
the maturity date of the loan;
(i)
the relevant risk category to which the loan is assigned in accordance with the risk management framework referred to in Article 4(4), point (f) of Regulation (EU) 2020/1503;
(j)
the schedule for the repayment of the principal and for the payment of interest on the loan;
(k)
the compliance of the project owner with the instalment payment schedule of the loan by indicating any past due payment or any default as referred to in Article 1(1) of Commission Delegated Regulation (EU) 2022/2115 ( 4 ) ;
(l)
the percentage of the amount of the crowdfunding project being financed by the investor through the loan, expressed as the ratio between:
(i)
the notional amount of the loan;
(ii)
the total amount of the crowdfunding project.
2. The information provided for each loan included in a portfolio shall report whether a project owner has more than one crowdfunding project in place financed through any crowdfunding service provider, and contain all of the following information:
(a)
the type of offer and the instrument used for financing the project;
(b)
the completion date (past or expected);
(c)
the notional amount that the project owner is borrowing;
(d)
other relevant information, including all other financial obligations and contingent liabilities.
3. The crowdfunding service provider shall require the project owner to provide the information referred to in paragraph 2.
4. Crowdfunding service providers shall take appropriate steps to ensure that the information provided by project owners in accordance with paragraph 3 is accurate, reliable and up to date.
Information about risk mitigation measures
1. For the purposes of Article 6(4), point (e), of Regulation (EU) 2020/1503, a ‘risk mitigation measure’ shall mean a technique used by a project owner to reduce the credit risk associated with a loan, which can take either of the following forms:
(a)
‘funded credit protection’, which means a technique of risk mitigation where the reduction of the credit risk associated with a loan derives from the right of the investor, in the event of the default of the loan or on the occurrence of other specified credit events relating to the project or project owner, to liquidate or obtain transfer or appropriation of, or to retain, certain assets or amounts, or to reduce the amount of the loan;
(b)
‘unfunded credit protection’, which means a technique of risk mitigation where the reduction of the credit risk associated with a loan derives from the obligation of a third party to pay an amount in the event of the default of the loan or on the occurrence of other specified credit events relating to the project or project owner.
2. In the event that a loan is guaranteed by ‘funded credit protection’ as referred to in paragraph 1, the crowdfunding service provider shall provide all of the following information:
(a)
the type of asset(s);
(b)
the most recent valuation of such asset(s) and the amount(s) that can be liquidated, transferred, retained or appropriated;
(c)
the valuation method;
(d)
the ratio between the amount referred to in for in point (b) and the total notional amount of the loan, expressed as a percentage.
3. In the event that a loan is guaranteed by ‘unfunded credit protection’ as referred to in paragraph 2, the crowdfunding service provider shall provide, as a minimum, the following information:
(a)
the name, address and legal nature of the third party acting as protection provider or guarantor;
(b)
the ratio between:
(i)
the notional amount of the loan covered by the third party;
(ii)
the total notional amount of the loan, expressed as a percentage.
4. For the purposes of paragraphs 2 and 3, crowdfunding service providers shall ensure all of the following:
(a)
that the eligibility and the valuation of any risk mitigation measure are assessed in accordance with adequate policies and procedures within the risk management framework, as referred to in Article 4(4), point (f) of Regulation (EU) 2020/1503 and as specified in accordance with Article 19(7), point (d) of that Regulation;
(b)
that the valuation of any risk mitigation measure takes into account all the disposition costs arising from obtaining and selling collateral.
Information on defaults on credit agreements by the project owner
1. In order to comply with Article 6(4), point (f), of Regulation (EU) 2020/1503, crowdfunding service providers shall require project owners to provide information on defaults that have occurred under credit agreements in the past five years.
2. When ‘credit agreement’ refers to an agreement whereby an investor grants to a project owner credit in the form of a loan for a specific crowdfunding project, the following definitions shall apply:
(a)
‘default’ means ‘default’ as defined in Article 1(1) of Delegated Regulation (EU) 2022/2115;
(b)
a ‘credit agreement’ means an agreement whereby an investor grants to a project owner credit in the form of a loan for a specific crowdfunding project.
3. The information on defaults referred to in paragraph 1 shall be provided by the project owner to the crowdfunding service provider at all of the instances:
(a)
at the point of loan origination;
(b)
immediately after the occurrence of a default event;
(c)
until the maturity date of the credit agreement included in the portfolio.
4. Crowdfunding service providers shall take appropriate steps to ensure that the information provided by project owners in accordance with paragraphs 2 and 3 is accurate, reliable and up to date.
5. When ‘credit agreement’ means any financial instrument as defined in Article 4(1), point (50), of Regulation (EU) No 575/2013 of the European Parliament and of the Council ( 5 ) and information on past defaults are not available, crowdfunding service providers shall require project owners to provide all of the following information over the past five years:
(a)
past due days;
(b)
amount of arrears.
6. Crowdfunding service providers shall disclose to investors whether the source of information referred to in paragraphs 2 and 5 is included in one or more of the following and specify which:
(a)
a sworn statement by the project owner;
(b)
information available in credit registers;
(c)
publicly available information, including from debt collection companies or credit rating agencies;
(d)
other type of information.
7. Crowdfunding service providers shall take appropriate steps to ensure all of the following:
(a)
that the information provided by project owners in accordance with paragraph 5 is accurate, reliable and up to date;
(b)
that the disclosure to investors of the information referred to in paragraph 5 is in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council ( 6 ) .
Information on fees paid in respect of the loan by the investor, the crowdfunding service provider or the project owner
The information about the fees paid in respect of loans as referred to in Article 6(4), point (g) of Regulation (EU) 2020/1503 shall contain all of the following:
(a)
the natural or legal person paying the fees, including whether that person subject is the investor, the crowdfunding service provider, the project owner, or a third party;
(b)
the monetary amount of the fees;
(c)
the natural or legal person receiving the fees, including whether that person is the crowdfunding service provider or, in the event of operational functions being outsourced, a third party;
(d)
any services remunerated by fees, including subscription fees, management fees, fees for debt collection processes and exit fees;
(e)
the calculation method for the fees, including whether the amount of the fees represents a percentage of the notional amount of the loan or any other variable, or a fixed amount;
(f)
the schedule of payment of the fees.
Information on the valuation of the loan
1. The valuation of the loan referred to in Article 6(4), point (h) shall, for each individual loan, reflect the likely actual return, defined as the discounted annual return on the investment expected by the investor on a given valuation date, based on the most recent available information.
2. For the purposes of paragraph 1, the calculation of the likely actual return shall be based on all of the following information:
(a)
the interest rate or any other compensation laid down in the loan;
(b)
the yield to maturity;
(c)
the application of any fees as referred to in in Article 6(4), point (g) of Regulation (EU) 2020/1503;
(d)
the expected default rates, determined in accordance with Article 4(1) of Delegated Regulation (EU) 2022/2115;
(e)
any other costs paid by the project owner or the investor or the crowdfunding service provider in relation to the loan.
3. The valuation of the loan as referred to in Article 6(4), point (h) of Regulation (EU) 2020/1503 shall include the valuation of the portfolio in which the loan is included, expressed as the ratio between the following:
(a)
numerator obtained by the sum of the products of:
(i)
the notional amount of each loan in the portfolio;
(ii)
the respective likely actual return of every loan of which the portfolio is composed;
(b)
denominator obtained by the sum of the notional amount of every loan of which the portfolio is composed.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
