Brussels, 29th May 2015: EFAMA has today published a response to the second FSB/IOSCO consultation on the assessment methodologies for identifying non-bank, non-insurer (NBNI) globally systemically important financial institutions (G-SIFIs).

In its response, EFAMA reminds international standard-setters that the asset management industry is a well-regulated and well-diversified industry.

The European regulatory regime within which asset managers (UCITS and AIFM Directives) operate already addresses many of the FSB/IOSCO concerns regarding potential systemic risks; notably in terms of mandatory diversification and strict collateral requirements, counterparty exposure and leverage limits, enhanced reporting and stress-testing requirements for specific AIFs. Also EU legislation for banks (CRD IV) and financial market infrastructures (EMIR) also play a key role in addressing potential systemic risks.

This EU legislative framework must for this very reason be appropriately considered and similarly, so do the existing and well-functioning liquidity management tools which allow asset managers to meet redemption requests even during periods of market turmoil.

Peter De Proft, Director General of EFAMA, commented: With this response, EFAMA wishes to address concerns about the business model of asset managers and makes clear how the FSB/IOSCO analysis of contagion channels is not appropriate in the context of the asset management industry.

Unlike other financial institutions, asset managers operate as agents in the sole interest of their clients and within the boundaries of an agreed investment mandate. The investments comprising the fund portfolio are legally segregated and entrusted to a depositary, thus severed from the balance sheet of the asset manager.

The asset management industry regrets that some of the evidence it had previously put forward to illustrate the flaws of the FSB/IOSCO entity-based approach has not been considered. EFAMA believes any systemic risk debate should be looked at from the perspective of market activities and products - and their related risks - performed by any financial market actor, and not asset managers uniquely.

European asset managers are also not convinced by the approach of designating systemic entities with no indication of the measures deemed to apply.

Importantly, EFAMA would recommend that regulators analysis of potential risks from asset management activities be assessed once empirical evidence has been gathered through recently enhanced reporting requirements, which would provide more accurate data supporting a fairer judgement of systemic risks.

Peter De Proft, Director General of EFAMA, commented: We wish to continue to assist the FSB/IOSCO and provide all necessary evidence demonstrating that asset managers are not systemically relevant. We hope the FSB/IOSCO will shift their current focus on entities to an activity-based approach, and see how the strict and comprehensive EU regulatory framework governing these activities already addresses their systemic risk-related concerns.

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