The EU banking regulator has set out the standards it expects regulated crowdfunding providers to follow when listing loan projects for investors to back small businesses and start-ups.
The European Banking Authority (EBA) has revealed draft regulatory technical standards (RTS) to be approved by the European Commission.
It includes rules on how platforms display information on calculating credit scores and the pricing or interest rate of projects.
In both cases, the EBA said the information should be provided in an easily available dedicated section of the website of the crowdfunding service provider.
The information should be “presented in a way that is easy to read and expressed in a manner that facilitates its understanding.”
“Investors using crowdfunding platforms may be exposed to the risk of having insufficient information, and/or incomplete understanding of the viability of a crowdfunding project or of the due diligence conducted by the crowdfunding service providers,” the EBA said.
“Therefore, it is important that adequate information is disclosed to investors on how credit scores are calculated, and crowdfunding offers are priced.
“Moreover, investors need to be sure that crowdfunding service providers are subject to a minimum set of common standards in terms of credit risk assessment, governance, and risk management structures.”
It comes as peer-to-peer lenders on the continent are now able to operate across borders more easily due to harmonised European Union crowdfunding regulations.