The Alternative Investment Management Association (AIMA) published its response to the European Commission (EC) non-bank financial intermediary (NBFI) consultation.
Here are some of the most pertinent points raised:
- There is no justification for macroprudential regulation of funds. They are not concentrated or large enough to create systemic risk.
- We welcome the consultation’s acknowledgement that one size does not fit and that regulation has to be appropriate to the characteristics of different sectors, businesses and business models.
- The term non-bank financial intermediation is so broad as to be meaningless given the broad range of entities, business models and activities encompassed and, as a result, that term perpetuates the incorrect idea that banking regulation is somehow a gold standard when it is simply inappropriate for investment funds and their managers.
- Investment funds and asset managers are already highly and robustly regulated by the Alternative Investment Fund Managers Directive (AIFMD) and on the retail side by Undertakings for Collective Investment in Transferable Securities (UCITS).
- It is wrong to say that fund leverage is “hidden’ or ‘excessive”. AIFMD Annex 4 reporting is very extensive and includes counterparties. Leverage in funds is not excessive. It is tightly managed with counterparties and margin and collateral.
- Instead of asking for more reporting, the EC should consider how to make better and more coordinated use of the existing reporting which is extensive but not fully joined up.
- The newly revised terms of AIFMD and UCITS Directive resulting from the recently completed AIFMD review process should be given time to take effect and be assessed on their performance before any further changes are made.