“Crowdfunding has the potential to become a key source of SME financing in the long term”
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EBF adviser: Daniele De Gennaro

Publication date: 27 November 2017

Key points:

The European Banking Federation, responding to the European Commission’s Inception Impact assessment for a legislative proposal for an EU framework on crowd and peer to peer finance, sees this plan as a good starting point considering that crowdfunding has the potential to be a key source of financing for SMEs over the long term.

The combination of crowd-based activities, social media and automated matching platforms that apply innovative technology may significantly change the way consumer/SME credit is contracted. It also changes the way equity investment flows into start-ups, scale-ups and SMEs, as they offer new gateways to finance for individuals and small companies facing difficulties to tap the traditional banking channels.

We believe it would be desirable to have a consistent EU wide regulatory framework for consumer protection and considering/reviewing whether specific categories of crowdfunding service providers are in fact subject to existing financial regulation appears prudent actions to a positive way forward.

Therefore, the EBF would support the Policy Option 3 indicated in the Inception Impact Assessment. This option would define a comprehensive EU framework by introducing a specific license for crowdfunding with passporting rights will contribute the most to: (i) reduce existing divergences across Member States, and (ii) achieve a level playing field in which the same activity is subject to the same regulation. Options 1 and 2 would not suffice to address the issues that are correctly identified by the European Commission: (i) these would not contribute to crowdfunding reaching a
cross-border scale and (ii) would not help in providing an effective risk management framework that ensures sector integrity and trust. Option 4 could facilitate the scale-up of crowdfunding platforms across countries, but would not go as far as option 3 in achieving a level playing field across borders, and could lead to the prevalence of different standards in terms of investor and consumer
protection in those platforms that choose to conduct only national business.