Financial stability
At the international level the FSB, together with IOSCO, are responsible for implementing policies that address structural vulnerabilities arising from asset management activities. Several regulatory actions have been taken to ensure the resilience of the asset management sector since the global financial crisis. The EU’s current risk management regime has recently been put to the test by the Covid-19-led market stress, proving its overall resilience.
Future regulation should be targeted, risk-based and reflect the differing risk profiles of Non-Bank Financial Institutions (NBFI) entities and activities. EFAMA and its members are committed to working closely with international and European regulators on the ongoing improvement of investment funds’ existing risk management framework, and to foster the development of best practices within the investment management industry.
FSB consultation on NBFI leverage
EFAMA welcomes the FSB recommendation that jurisdictions develop domestic frameworks to monitor and mitigate the build-up of leverage. These analytical frameworks should take a holistic approach and be empirically driven. The main systemic risk stemming from leverage is the imbalance between liquidity demand and supply during periods of stress, not the (collective) default of non-bank financial intermediaries.
IOSCO consultation on revised liquidity recommendations
In its response to IOSCO’s consultation on the revised recommendations for liquidity risk management for collective investment schemes, EFAMA welcomes the fact that IOSCO recognises aspects essential for proper risk management (e.g., asset managers’ primary responsibility and the absence of one-size-fits-all approaches).
Don’t add complexity to fund liquidity management rules without clear added benefits, says EFAMA
Protecting long-term investors from material dilution is a legitimate objective, however, EFAMA doubts that the FSB draft proposals on structural vulnerabilities in the open-ended fund (OEF) sector and the IOSCO ones on anti-dilution liquidity management tools (LMTs) would increase the resilience of the OEF sector. In our view, this framework would add unnecessary complexity to liquidity risk management and, ultimately, result in higher costs for end-investors with little benefit.
IOSCO Consultation Report on anti-dilution liquidity management tools
EFAMA welcomes the IOSCO Consultation report which we believe is a good starting point for further engagement with our industry on dilution in Open-Ended Funds (OEFs). We believe that dilution may indeed trigger investor protection concerns for certain funds and welcome, in this respect, IOSCO’s commitment to protect end-investors from material dilution. This being said, we however do not support the consultation report’s significant emphasis on financial stability considerations.
FSB Consultation Report on addressing vulnerabilities from liquidity mismatch in open-ended funds
EFAMA welcomes the opportunity of this consultation report to share views on how regulators could foster greater consistency in the management of liquidity risks in the Open-Ended Funds (OEFs) sector and on how the FSB should proceed in the future to evaluate any potential build-up of systemic risks in capital markets.
Joint EFAMA & AMIC report on liquidity stress tests in investment funds - January 2019
Solvency II: Data Impacts on Asset Management
The report highlights the need for the asset management industry to proactively work with European insurance companies to respond to the strategic changes caused by the Solvency II Directive.
