2 September 2009
City in Brussels to lobby on EU AIFM Directive
Stuart Fraser, Chairman of the Policy and Resources Committee at
the City of London Corporation, is in Brussels today (Wednesday 2
September) with the Mayor of London to urge important changes to
the European Commission’s Alternative Investment Fund Managers
(AIFM) Directive, currently starting the legislative process in the
European Parliament and Council.
The Commission’s Directive was published on 30 April 2009 and
aims to provide a comprehensive regulatory structure for AIFM
operating within the EU. AIFM, which include the managers of hedge
funds and private equity funds, managed around €2 trillion in
assets at the end of 2008.
In advance of a series of meetings with important EU figures,
Stuart Fraser said:
‘It’s right that the EU helps to sort out issues around the
financial crisis but any legislation needs to do the job it sets
out to do. Others have said that the draft directive is
unsatisfactory and we’re very unhappy with some key parts of
it.
‘If it goes ahead unchanged it will be narrowly protectionist,
fail to take account of other global players (including the US),
and damage an important EU industry.
‘Of course we are supportive of the EU process – and have been
lobbying for change for some time to a draft that has had no impact
assessment, industry consultation or cost / benefit analysis. In
contrast, the process for updating the UCITS Directive, which
applied the better regulation principles, include a number of
consultation and lasted three years.
‘There are many positive things, for example on single market
passports for non-UCITS funds, and on the principle of focussing on
fund managers for registrations and authorisation. We also welcome
moves to improve transparency.
‘But among the problems are measures which actually worsen the
management of risk, increase costs and reduce choice. There are
also some measures in there which seem to be anti-global and are so
EU-protectionist that they risk drawing counter-measures from other
non-EU business centres. Moreover, as we start to emerge from the
financial crisis we should be vigilant against putting unnecessary
burdens on AIFMs, that do not pose systemic risks, or we risk
blunting the economic recovery across the EU.
‘One key area is the matter of delegation of risk management
functions by an AIFM, with the directive concentration too much on
where business is done rather than how.
‘Another is the plan to limit custodianship to EU registered
credit institutions – a measure that is not only protectionist and
but may actually encourage investors to use less regulated
products. For example, in many emerging markets, and some G8 ones,
securities have to be held by a locally incorporated entity so by
restricting the role of depository to EU credit institutions
investors would be unable through an AIFM to access these markets.
It seems wrong, too, for AIFM provisions to be stricter than retail
rules.
‘The provisions about the leverage limits also seem unhelpful in
that they set notional (fixed) limits rather than ones related to
real risks – this sort of fixed limits would disproportionately
affect the many smaller firms. Notional requirements also tend to
be pro-cyclical, something we are all trying to avoid.
‘The meetings – which follow Tuesday’s City research seminar in
Brussels – are a chance for leading EU figures to hear the views of
the City and the Mayor of London. Interlocutors include: EU
Internal Markets and Services Commissioner Charlie McCreevy, EPP
coordinator on ECON Committee Jean-Paul Gauzes, UK permanent
representative to the EU Kim Darroch (Stuart Fraser only), a number
of London’s MEPs.
Mr Fraser added:
‘Of course we recognise that the directive reflects the
collective will the EU member states to enhance transparency and
reduce systemic risk within European financial markets – and we
fully support this objective. We are also fully committed to
working in detail with EU colleagues to getting this right.
However, in order to reaffirm our reputation for excellence, we
need to be sure that any reforms do not unintentionally diminish
the ability of countries in the EU to compete in this increasingly
global industry or force firms that are globally integrated to
relocate out of the EU."
Ends
Notes to editors
- About the City of London:
The City of London Corporation supports and promotes wholesale
financial services and business. It also provides local government
and police services for workers, residents and visitors to London's
Square Mile business district and also provides valued services to
wider London and the nation as a whole including: Guildhall Art
Gallery, Barbican Centre, Central Criminal Court at Old Bailey,
4,240 hectares of open space, three wholesale food markets and acts
as London's Port Health Authority.
- About Stuart Fraser:
Stuart Fraser is Chairman of the Policy and Resources Committee of
the City of London Corporation. View his biography
here.
-
Download a photo of Stuart Fraser
here
Press contacts
James Abbott
Tel: 020 7332 1754
Mob: 07831 543188
Email:
james.abbott@cityoflondon.gov.uk
Sanjay Odedra
Tel: 020 7332 1835
Mob: 07954 327370
sanjay.odedra@cityoflondon.gov.uk