EAMA and FEFSI seek modified capital adequacy rules
BELGIUM – The European investment management industry is still pressing the European Commission to modify further its approach for operational risk for investment firms.
The European Asset Management Association (EAMA), representing asset managers and the Federation Europeeene des Fonds et Societesd’Investissement (FEFSI), the fund groups body, welcome the Commission’s ‘Proposed way forward’ to permit firms with limited licence to calculate their capital requirements as under the current rules, using the expenditure based rules (EBR).
But to ensure that the new capital regime adequately takes account of the lower risk profile of investment managers in Europe, further modifications are needed to those outlined in the Commission’s ‘Potential way forward’ proposals, the two bodies say.
Both are concerned that only a limited number of firms would be able to benefit from this approach because, the says “supervisors might restrict its use in a number of countries”. They also point out that the majority of EU investment firms that are part of larger banking groups will have to follow a group-wide approach and implement one of the Balse approaches.
EAMA and FEFSI suggest that member states should not have the option to limit the use of the EBR approach. They also want a way of ensuring that investment firms that are part of a larger group adopting the new Balse approaches are not faced with a significant increase in capital requirements.
UCITS management companies should be able to calculate their consolidated capital requirements using the UCITS capital adequacy rules. Otherwise, these companies which are part of financial groups could find themselves having to calculate their regulatory capital on three different bases, the associations point out.
These and other issues are contained in a letter sent to the Commission in Brussels, a copy of which appears on the FEFSI website at www.fefsi.org/unrestricted area/Documents/econiss.htm. The Commission Services Third Consultation Paper is available at http://europa.eu.int/comm/internal markets/en/finances/capital adequacy/index.htm.