(1)

Article 23 of Regulation (EU) 2020/1503 requires crowdfunding service providers to provide sufficient information to investors on the quality of crowdfunding projects and project owners, in particular by providing a key investment information sheet (KIIS), which contains the information needed to make an informed investment decision. However, investors should also be adequately informed on how crowdfunding service providers calculate credit scores for crowdfunding projects and project owners to allow them to better understand and compare the risks underlying different crowdfunding loans.

(2)

In recent years, the techniques of credit risk assessment and the calculation of credit risk scores, in addition to more traditional statistical techniques, have been developed under innovative approaches based on artificial intelligence and machine learning. For example, for small and medium-sized enterprises without a long credit history, innovative methods based on transactional data may prove more useful than methods based on traditional balance sheet data. Due to their complexity, the use of those techniques may increase the asymmetry of information between investors and crowdfunding service providers. Therefore, the description of the method used by crowdfunding service providers to calculate credit scores should indicate the scoring model used to support such calculation, as well as sufficient information on the financial and non-financial factors that are used as input in those scoring models and on the output provided by the scoring models.

(3)

Investors may not be fully aware of the mechanism for, and the several factors involved in, the price formation for crowdfunding offers. Transparency should therefore be increased to facilitate the comparison between different loans. In particular, when crowdfunding service providers suggest the price of a crowdfunding offer, they should accurately describe the method used to calculate those prices. That description should consider those elements that are relevant both at the time and after the point when a loan is originated, in particular having regard to the fees that a crowdfunding service provider may ask from investors and project owners for the services provided to them.

(4)

The price of loans facilitated on crowdfunding service provider’s platform should be fair and appropriate. It should thus be ensured that the price reflects the risk profile and the net present value of the loan, and that the crowdfunding service provider has taken into account the general market conditions.

(5)

Crowdfunding service providers should carry out a reliable assessment of credit risk as minimum protection for investors that do not have sufficient information on the creditworthiness of project owners and on the sustainability of crowdfunding projects. To ensure that crowdfunding service providers assess the credit risk of crowdfunding projects and project owners in a sound and robust manner, they should consider a sufficient amount of information on those factors that affect the financial situation and the business strategy of project owners and crowdfunding projects. Furthermore, as a comprehensive assessment of credit risk has to consider also whether such risk is offset by the availability of credit protection arrangements, crowdfunding service providers should also consider information on collateral and guarantees used to mitigate credit risk.

(6)

Crowdfunding service providers should have access to relevant information contained in the documentation related to credit risk assessments to allow adequate benchmarking analysis on the creditworthiness of perspective project owners and improve the models and tools used for approving projects to be financed on their platforms. Personal data included in that information should be stored for a period of no more than five years and anyway treated in accordance with Regulation (EU) 2016/679 of the European Parliament and the Council (2).

(7)

The process to determine the price of a crowdfunding offer should also include an accurate valuation of crowdfunding loans. Crowdfunding service providers should therefore ensure that, during the life-cycle of the loan, such valuation is based on a sufficient number of factors that reflect the income and cost structure of the loan, as well as its riskiness.

(8)

Sound governance structures enhance investor protection. To that end, crowdfunding service providers should have in place governance arrangements that are proportionate to their complexity, together with policies specifying the elements of a disclosure that ensure that the information provided to investors is accurately and sufficiently in detail representing the crowdfunding project. Moreover, a due diligence should be carried out on the crowdfunding projects and on project owners. The risk-management framework referred to in Article 4(4), point (f), of Regulation (EU) 2020/1503 should therefore identify the main roles and functions that are responsible for the credit risk assessment and for the assignment of loans to the respective risk categories. Such framework should match the complexity of the business model of the crowdfunding providers and the type of lending facilitated, and reflect the safeguards established in the Regulation (EU) 2020/1503 to manage money laundering and terrorist financing risks.

(9)

This Regulation is based on the draft regulatory technical standards developed by the European Banking Authority (EBA) in close cooperation with the European Securities and Markets Authority (ESMA) and submitted to the Commission.

(10)

EBA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (3).

(11)

The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 of the European Parliament and of the Council (4) and delivered an opinion on 10 January 2023,