The European Banking Authority (EBA) has published a formal Opinion on lending-based crowdfunding regulation in the European Union (EU).
The Opinion describes a range of lending-based crowdfunding models, before analysing the lender, borrower and platform-operator facing risks of using them. It also includes a detailed analysis of the extent to which European law governs lending-based crowdfunding depending, for example, on the model being used, and the different ways in which the European Member States interpret and apply these laws.
In the EBA’s Opinion, “The convergence of practices across the EU for the supervision of crowdfunding is … desirable … to avoid regulatory arbitrage; create a level-playing field; ensure that market participants … have confidence in this new market, and to contribute to the single European market…”
The EBA also believes that this convergence should be based on existing EU law: “The EBA considers the [Payment Services Directive (PSD)] to be the Directive that is most feasibly applicable to lending-based crowdfunding. [However], in some Member States, there seems to be an opportunity for platforms to choose between the PSD and the [Electronic Money Directive] … [If] the market evolve[s] [and] credit institutions [provide] loans … (as some indications already suggest), the … [Capital Requirements Regulation / Capital Requirements Directive, the Consumer Credit Directive and the Mortgage Credit Directive may also] become applicable … To that end, one possible way for the EU legislators to achieve a coordinated approach to crowdfunding across the single market is to communicate how existing EU law should be applied to lending-based crowdfunding … However, … crowdfunding platforms typically fund small or medium sized companies, and … some platforms themselves may be small or medium sized companies [so] a proportionate … approach should be considered, to … promote the growth of crowdfunding, … ensure market confidence and provide safeguard for the participants“.
The Opinion closes by describing the way in which crowdfunding is already regulated in the United Kingdom, France and Italy; and the way in which it will be regulated in Spain, so that these arrangements can also be taken into account by the European institutions.
It is not yet clear whether, when or how European legislators will respond to this Opinion. However, they seem to have an immediate opportunity to do so – PSD2 is still being developed and could easily be amended to take the EBA’s suggestions into account, if the institutions were minded to do so.