A push by the European Commission to roll-out its long-awaited Capital Markets Union (CMU) has been criticised by two financial trade bodies.
The Commission yesterday announced a three-part plan to boost the cross-border market for investment funds, promote the EU market for covered bonds and to bring greater certainty to cross-border transactions.
The CMU is one of the Juncker Commission’s flagship policies to strengthen Europe's economy and create jobs.
Valdis Dombrovskis, Commission vice-president responsible for the CMU, said: " To have a genuine CMU in Europe by 2019, we need to advance in three directions: European labels and passports for financial products, harmonised and simplified rules to deepen capital markets and more consistent and efficient supervision."
The €2.1 trillion EU market for covered bonds – financial instruments backed by a segregated group of loans – is currently fragmented along national lines with differences across member states. The Commission estimates that savings of up to €1.9 billion a year for borrowers could be achieved through the harmonisation of issuance rules.
With just over a third (37%) of Ucits funds and around 3% of alternative investment funds (AIFs) registered for sale in more than three member states, the Commission says that more needs to be done to enable the EU’s €14.3 trillion investment funds market to achieve its full potential.
It estimates that removing regulatory barriers to fund sales could save asset management firms up to €440 million a year.
However the European Fund and Asset Management Association (Efama) said that any changes to the Ucits and AIFM directives could act as an additional barrier to cross-border fund distribution.
Efama director general Peter De Proft said: “The Commission’s proposal unfortunately adds yet a new layer of rules. Efama would strongly support practical solutions at the level of the European Securities and Markets Authority.
“These will enhance supervisory convergence and legal certainty on the basis of a common understanding among national regulators and can be developed and implemented within a much shorter period of time than a legislative proposal.”
The international arm of the US’s Investment Companies Institute, ICI Global, warned that the Commission’s plans for the cross-border distribution of funds “falls short of meeting the initial ambitions the Commission laid out some months ago”.
ICI Global managing director Dan Waters said: “These reforms will do little to ease distribution, lower investor costs, and increase investor fund choices.
“We look forward to engaging with the co-legislators to improve the proposal with regard to the pre-marketing regime, creation of a pan-EU private placement regime and required notifications for cross-border fund marketing.”
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