PRIIP Regulation: Latest ESAs’ Level 3 Q&As Updates

On December 5, 2025, the European Supervisory Authorities (ESAs) provided an update to their PRIIP Q&As and introduced five new Questions and Answers in relation to the EU PRIIPs regulatory requirements.

The Q&As document encompasses the guidance of the European Supervisory Authorities (ESAs) on the application and implementation of the PRIIP Regulation and its Level 2 Delegated Acts. It addresses questions related to the interpretation of PRIIP Regulation and Regulatory Technical Standards (RTS).

The newly added Q&As are outlined as follows:

Section VI : Performance Scenarios – Articles 3 and 8 and Annexes IV and V of the PRIIP Delegated Regulation

• Q&A 27 clarifies whether a UCITS product whose payoff at maturity equals the redemption value of a pool of bonds belongs to PRIIPs Category 2 or Category 3.

Key Takeaways:
In such an event, the product is classified as PRIIPs Category 2, because its payoff is considered a constant multiple of the prices of the underlying assets. The performance scenarios must hence follow the Category 2 calculation methodology, meaning any negative historical returns must be reflected in the scenarios. The “floor” shown in scenarios is only for products with unconditional capital protection (per Annex IV, point 4 and Annex V, part I, point 3(b). Since the bond redemption value is not unconditional capital protection, it cannot be treated as a guaranteed minimum payoff in the scenarios. Therefore, it must be clearly stated that investors can lose some or all of their capital, irrespective of the scenario calculations.

• Q&A 28 clarifies whether, when assessing the appropriateness of a benchmark or proxy under Annex IV point 16(a), the PRIIP’s credit liabilities must be considered and to what extent.

Key Takeaways:
PRIIP manufacturers must ensure that the risk-return profile and volatility characteristics of the PRIIP are consistent with those of the chosen benchmark or proxy (per Annex IV points 16 and 17). This means, that liabilities and leverage must be included in this assessment. Both the current leverage ratio and the maximum allowable leverage under the investment rules must be considered. Manufacturers may apply additional relevant criteria beyond those listed in Annex IV point 16, provided they can justify their relevance to the PRIIP’s objectives and underlying assets. If such additional criteria are identified as relevant, manufacturers are expected to incorporate them into the assessment.

• Q&A 29 clarifies whether benchmark/proxy assessment can consider only the PRIIP’s current asset-class exposures and defer considering other eligible asset classes until the PRIIP invests in them.

Key Takeaway:
Benchmark or proxy assessments must consider not only the PRIIP’s current asset allocation but also all potential assets permitted under its investment policy, as required by point 16(d) of Annex IV. It is not permissible to ignore eligible asset classes simply because the PRIIP has not yet invested in them, since the benchmark or proxy must remain appropriate even if the asset allocation changes over time. However, how fully future allocations can be incorporated depends on the specific product, its history, the breadth of eligible assets, the likelihood of investing in certain asset classes, and how often allocations change. Overall, the methodology used must be plausible and appropriate for the PRIIP.

• Q&A 30 clarifies whether the log-return formula in Annex II point 11 also applies to calculating performance over sub-intervals.

Key Takeaway:
Log returns (natural logarithms) are required only for calculation methodologies where the PRIIPs Delegated Regulation explicitly specifies them, such as point 11 of Annex II or point 18 of Annex IV. In other cases, like Category 2 performance scenarios under point 7 of Annex IV, simple returns may be used. Regardless of the method, compounding effects must be accurately reflected in the performance scenarios.

• Q&A 31 clarifies whether actively managed funds transitioning from weekly to daily NAVs can continue using weekly data for VaR and performance scenario calculations until a sufficient daily time series is available.

Key Takeaway:
The data series must include the most recent prices, and different frequencies can be used for performance scenarios versus MRM calculations. The PRIIP RTS does not prescribe a concrete appoach to be taken. Both using the prices on weekly basis, as well as using the daily timeseries and amending with proxy data that is priced daily are permissible. PRIIP manufacturers must choose the most plausible and appropriate method for the specific product.

Next steps

The PRIIPs Regulation has been in force since 2018. The most recent Regulatory Technical Standard updates were implemented in 2023.

Our KID Compliance Services are already aligned with this Level 3 Q&A update and therefore no further updates are required.

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