PRIIPs Regulatory Document (KID & EPT) Managed Service

The Packaged Retail and Insurance-based Investment Products (PRIIPs) legislation applies to Banks, Life Insurers, and Asset Managers who market their products to EU-based retail investors. Product manufacturers, and in some cases distributors, must publish and maintain accurate Key Information Documents (KIDs) for a wide range of products, including funds, investment-linked insurance products, structured products, and derivatives.

KIDs must also be translated into the languages of the countries where they are sold.

UCITS funds are currently exempt from the PRIIPs regime, but the exemption will expire on 1st July 2022, after which all UCITS funds sold into the EU will require a PRIIPs KID.

In addition, distributors of PRIIPs need detailed product information from manufacturers, and in almost all cases will expect this in the format of the European PRIIPs Template, a standard defined by an industry working group.

• Annual reviews in line with KID regulations.
• Monitoring of KID numbers and content, with refresh when material changes occur.

Client

A top UK bank with Europe-wide distribution of derivatives to retail clients.
Issue

The bank was obliged to provide PRIIPs KIDs for a wide range of FX
derivates with complex payoffs. The product values can be volatile, and
so the KIDs required frequent refresh to ensure they remained ‘accurate
and not misleading’ under changing market conditions. The bank elected
to ‘over-comply’ by refreshing them on a daily basis, requiring a highly
automated solution. The documents must also be translated into multiple
languages.
Approach

We worked with the bank’s quant team to analyse the payoffs of the
products, and build risk, performance, and cost calculations according
to the regulations. After extensive testing and verification of the
calculation, and detailed review of the multi-language translation, the
solution was delivered in time for the launch of PRIIPs on 1st January
2018, and has been maintained and updated since.

Value Delivered

• Deloitte was able to field subject matter experts in derivatives,
  and assist the client in interpretation of the corresponding
  legislation, as well as coordinating discussions with their peers under
  the auspices of ISDA.
• Deloitte delivered the solution for successful client acceptance by
  the regulatory deadline. Without this, the bank would have been forced
  to withdraw the in-scope products from sale across the EU.
• Deloitte architected a solution that minimised the need for client
  involvement in BAU operations by automating the document refresh
  process, and by re-using pre-approved calculations and text narratives
  across documents and products.

The solution also allowed a single platform and market data source to
be deployed across multiple European locations operated by the bank.