In light of the last trilogue discussions on 25th November and the ongoing discussions on the scope of the European Crowdfunding Service Providers Regulation („Regulation“), the Association of German Lending Platforms (Verband deutscher Kreditplattformen) would like to take this opportunity to detail our position on the inclusion of descretionary services in loan agreements.
The Association of German Lending Platforms remains supportive of the objective to facilitate access to finance for SMEs by creating a pan-European framework for crowdfunding services, and has been throughout the legislative process. We understand that „discretionary services“, or more specifically „individual portfolio management of loan agreements“ are now likely to be included under the scope of the Regulation. We would welcome the inclusion of such business models, which are common throughout the EU and in the interest of investors, if a number of crucial points for lending platforms can be addressed during trilogues.
Under „discretionary models“, which are commonly called „autobid“, „autoinvest“ or „portfolio builder“, platforms execute individual investment decisions of investors. Investors specify their investment decisions by certain criteria and details (e.g. based on risk bands and including the investment amount). Lending platforms execute these instructions when listing loans on their platforms. In contrast to the more traditional „pick and choose“ features, these tools enable investors to spread relatively small amounts across a large number of projects. As an example, an investor might choose to invest EUR 2,000 in parts of EUR 20 across 100 loans. This would conveniently create a well-diversified portfolio that is much more likely to earn stable returns than large investments in a handful of projects. In addition to better diversification and user experience, autobid features allow investors to rely on on a specific platform’s credit analysis, which is typically based on statistical risk models, manual underwriting and many more data points that can be shared with investors on an ongoing basis.
To ensure the Regulation provides workable rules for these features, we believe that further changes to certain provisions of the . Regulation are necessary. Unless adequate rules for these models are introduced, the Regulation risks de facto prohibiting autobid features.
In addition, there are a few issues regarding the existing national regulatory framework in Germany we would like to address. We are at your disposal should you have any questions and would like to discuss discretionary services in more detail.
1 File no. 10557/19 (24 June 2019) – Institutional File 2018/0048 (COD).
2 File no. A8-0364/2018 (8 November 2018).