Regulatory Alerts2023-10-03
Study on the costs of structured debt instruments
The Belgian Financial Services and Markets Authority (FSMA) analyzed the Reduction in Yield (RIY) costs of 806 structured debt instruments notified between 2018 and 2022, finding an average cost of 0.72% that remained stable until rising in late 2022. The study reveals significant cost variations driven by distributor practices, with higher fees associated with products lacking full capital protection, shorter maturities, foreign currency denominations, and customized underlying indices. To address conflicts of interest, the FSMA recommends that issuers and distributors ensure pricing structures prioritize investor returns over margins and will intensify supervisory focus on entities marketing products with unjustifiably high costs.
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