Pan-European Asset Management

The asset management industry encompasses a broad range of businesses, in terms both of size as well as regulatory regimes. In terms of volume, the importance of the industry differs remarkably across jurisdictions, and is influenced by the wealth and savings behaviour of citizens, the existence and maturity of funded occupational pension schemes and the domestic regulatory environment. No less than five different legislative regimes govern asset management in the EU: banking, investment services, insurance, pension funds and investment funds.

The purpose of this Task Force was to assess the adequacy of the current regulatory framework and the consistency of rules across sectors, most importantly from a capital adequacy and asset allocation perspective, to determine whether further regulatory action was necessary to advance market integration.

The findings of the Task Force are as follows:

• There is no need for a horizontal asset management directive to supersede the current directives.
• The recent agreement on two new investment fund directives – UCITS (undertakings for collective investment in transferable securities) II & III – and the pension funds directive (provisional) are important steps towards a more integrated European market for asset management, with a truly single passport.
• The choice of asset management regime has been extended to include discretionary asset management as an option for UCITS management companies (in the UCITS III) and for the application of the prudent man rule of the pension funds directive to the pension fund business of life insurance companies.
• The key issue, in the spirit of the Lamfalussy report, is to focus on level 2 and 3 issues to ensure adequate cooperation between European supervisory authorities so as to guarantee consistent implementation and a harmonised approach in secondary legislation and in supervisory practices. Both the UCITS and pension funds directives require a Lamfalussy-style approach for implementation of legislation at levels 2 and 3, which is not yet in place.
• The UCITS Committee has only limited implementing powers and is not formally part of the Securities Committee/Committee of European Securities Regulators structure, which should ensure harmonised implementation.
• The Insurance Committee will need to be upgraded to cover the secondary legislation of the pension funds directive, and will need a second level to review harmonised implementation.
• The amended investment services directive may become the most open of the asset management directives, with harmonised conduct-of-business rules.
• The new UCITS directive is probably the easiest one, with a low capital requirement, and the option of discretionary asset management.
• Much also depends, however, on the extent of the application of the operational risk charge in the context of the New Basel Capital Accord, which may apply to both regimes. Compared to other lines of business, losses resulting from operational risk in the asset management industry have been limited so far, and these can be covered by private insurance. It should also be remembered that US investment fund companies are not subject to capital requirements and that US broker-dealers will not be subject to the Basel Accord.  

Chair

• Patrick Zurstrassen, Managing Director & President of the Management Committee, Crédit Agricole Indosuez Luxembourg

Rapporteurs

• Karel Lannoo, CEPS CEO
• Mattias Levin, former CEPS Fellow

Task Force Meetings

• 1st meeting: 29 Nov 2001
• 2nd meeting: 26 Feb 2002
• 3rd meeting: 11 Jun 2002
• 4th meeting: 17 Sept 2002  

Final Report of the Task Force: 'Pan-European Asset Management: Achievements and Regulatory Impediments'