The European Asset Management Association has commissioned research into risk in the European asset management industry after the EC hinted European managers should have some capital to cover business risk. The EC is talking about imposing a capital charge to reflect business risk and about extending minimum capital requirements to what it calls EU credit institutions and investment firms, which include asset management companies.
“There’s not a great deal of research on the subject as far as we can see and we don’t want the sort of legislation which is based on a complete misapprehension of the industry,” says Michael Haag, secretary of the EAMC. The report will seek to gauge the extent of business risk in the industry and it should be completed by the next review due later this year.
According to Haag, the EC has yet to give detailed proposals but it’s the potential outcomes causing alarm. The association is concerned minimum capital requirements have the potential to give European asset managers a competitive disadvantage.
The problem stems from the amendment of the previous directive which covered trading book risk, credit risk and interest rate risk, largely irrelevant to asset managers. “The new proposals cover business risk which is relevant to both the banking and asset management industries.”