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Open-ended funds and resilient capital markets - the perspective of the European asset management industry

Financial stability
05 July 2023 | Publication
Financial stability
an impressionistic view of the stock markets

For the best part of this decade, macro-prudential supervisors have argued that investment funds contribute to the build-up of systemic risks. Today, EFAMA has published an ambitious report that provides a comprehensive overview of the contribution of the European investment fund sector to the diversity and resilience of capital markets.


Some key findings include:

  • The investment fund sector is not systemically important, although there may be pockets of risk that require further attention from macro-prudential supervisors
  • The Financial Stability Board’s NBFI methodology to identify “economic activities that may give rise to systemic risks, known as the NBFI Narrow Measure,” is flawed
  • A successful Capital Markets Union (CMU) in Europe will require further growth in the investment fund sector
  • European policymakers have a good grasp of the realities of the fund market and are addressing liquidity management appropriately within the AIFMD/UCITS review, however the envisaged FSB recommendations on Open-End Fund (OEF) liquidity management are problematic on more than one count

The report also makes a number of policy recommendations for consideration by the FSB and IOSCO in their work, including:

  • The necessity for more effective, wholistic macro-prudential supervision
  • Investment funds need access to all liquidity management tools and management companies require a better view of who the end-investors are
  • Resilient capital markets will only come about through more comprehensive market reforms, including the introduction of a consolidate tape, the increased transparency and predictability of central counterparty margins, and greater regulatory guidance on the use of liquidity buffers by banks during periods of stress

Over the last 15 years, we have all felt the impact that financial crises can have on our daily lives, and systemic risks are not to be taken lightly. Through this publication, EFAMA shows today its commitment to contribute to the policy debate on systemic risks in the investment fund sector. A key take-away is that the current NBFI agenda clearly requires a rethink on the end of macro-prudential supervisors. We must remain vigilant for real systemic risks that could threaten our financial system, correct where necessary, and avoid fixing what is not broken.
(Tanguy van de Werve, Director General, EFAMA)

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