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Fund Managers Protest At Proposed Investor Protection Measures

Caroline Maxwell, Tax-news.com, London

26 January 2001

European fund managers are standing firm in their opposition to plans for a new directive on regulation and the industry body, the EAMA (European Asset Management Association) will next week present the European Commission with the largest study of fund management risk ever conducted in Europe.

The Commission is preparing to translate the Basle accord on banking supervision into a regulatory update for the entire financial industry, which would mean that investment managers and brokers would have to introduce and implement the same kind of investor protection measures as are required of banks. The new Basle accord, which would take effect in 2004, would propose the introduction of reserves to cover operational risks such as computer failure and fraud, but fund managers believe that being forced to hold extra capital would have a significant effect on competition. A spokesman for the EAMA expressed the association's concerns: '[It] is based on proposals designed for the global banking industry which are entirely inappropriate for the European asset management industry and would cause it serious long-term damage.'

There have been discontented rumblings from non-banks throughout the two year negotiation period, but with the new Basle accord in final consultation and due to be published in the latter part of this year, opposition has been stepped up, particularly in the UK, where stockbrokers have been lobbying both the Commission and the FSA.

The Commission has attempted to reassure the EAMA, by saying that the new rules on capital adequacy will be tailored to fit the particular needs and circumstances of European business, but judging by the ongoing outcry, no-one is terribly convinced.

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