European financial reforms strike right balance, says ALFI
Provisionally agreed reforms to European financial supervision have hit the right balance between European intervention and national autonomy, according to the Association of the Luxembourg Fund Industry (ALFI).
The reforms, agreed on the 21 March 2019, include a stronger role for the European Supervisory Authorities (ESAs) in tackling money laundering and the financing of terrorism, while leaving national authorities to supervise investment funds.
The ALFI, which represents the Luxembourg asset management and investment fund community, recognised that further work will be needed when an agreement is finalised by the Romanian Presidency of the Council and the European Parliament.
The association welcomed the decision to leave the direct management of investment funds to the National Competent Authorities (NCAs), adding: “ALFI has always taken the view that NCAs are best placed to know and understand their respective market’s offerings. Their close oversight of market participants and products guarantees the best and most efficient level of investor and market protection.”
The association also welcomed proposals to strengthen the governance and the powers of the ESAs “with a view to fostering regulatory and supervisory convergence [across Europe]”. As well as more powers for ESAs to deal with money laundering and the fight against the financing of terrorism, the propsals strengthen ESAs’ role in supervising critical benchmarks and data reporting services.
ALFI added that proposals confirming that Europe and ESMA have “no intention” of questioning the right to delegate portfolio management was “an important development and a positive response to a key concern of the investment fund and asset management industry”.
The association said the delegation of portfolio management for investment funds, has been a cornerstone of the success of the European investment fund industry for more than 30 years.
It said: “The final compromise provides for the possibility to create coordination groups, which can be established upon the request by the management board of the European Securities and Markets Authority or by a minimum number of members of the board of supervisors. Such groups may tackle topics that potentially require coordination.”
Denise Voss, chairman of ALFI, said: “Over the past 18 months, ALFI and the community of asset managers at large have engaged in a constructive dialogue with all stakeholders involved in this review. We welcome the balance that the final compromise strikes between further enhancement of convergence across Europe and recognising the key role that National Competent Authorities play in supervising their respective markets”.
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