Financial, Non-banking financial intermediation, Asset management, Nature of risks, Measures, Consob
Asset management
The financial market authorities of Italy, Spain, France and Austria list their key priorities for a macroprudential approach to asset management
The National Commission for Companies and the Stock Exchange (CONSOB – Italy), the Comisión Nacional del Mercado de Valores (CNMV – Spain), the Autorité des marchés financiers (AMF – France) and the Finanzmarktaufsicht (FMA – Austria) within of the debate on the macroprudential approach to asset management and in view of the next European Commission consultation on this topic.
In recent years, the risks arising from Non-Bank Financial Intermediation (NBFI) have come under the attention of global regulators, especially as their relative share of the global financial system has increased.
Concerns have also been raised about the potential negative effects on the real economy of shocks spread through or generated by Non-Bank Financial Intermediation.
These debates are important and legitimate.
When developing the regulations necessary to address the risks of asset management, their specific characteristics must be taken into account.
The asset management ecosystem is different from that of banks and equally varied, as are the vulnerabilities highlighted so far.
Therefore, the nature of the risks that regulators aim to address must be precisely defined: regulators should focus as a priority on the characteristics of asset management that generate excessive price volatility and liquidity stress.
Capital requirements and liquidity buffers are not the most suitable solutions to mitigate these risks in terms of financial stability.
Based on these considerations and as regards the asset management sector, the authorities of Italy, Spain, France and Austria have identified five priorities.
The first three concern short and medium term measures, while the others should be explored in depth in the long term:
– ensure wide availability and greater use of Liquidity Management Tools (LMT) in all types of Open-Ended Funds (OEF): the recent revision of the Investment Fund Managers Directive alternatives (Alternative Investment Fund Manager Directive) will allow significant progress in the adoption of LMT, although the second level measures are still being developed;
– ban the accounting at amortized costs of money market mutual funds (Money Market Funds): the accounting at amortized costs is intrinsically harmful to financial stability, it amounts to providing false declarations to investors, making them believe they enjoy a stable asset value net (Net Asset Value – NAV) and incentivises first movers;
– Systematic stress tests aimed at better understanding the vulnerabilities of each asset management group and its interconnections with other participants in the financial system should also be envisaged;
– introduce a truly consolidated supervisory approach as regards large cross-border asset management groups: as their teams and funds are currently subject to the control of different national competition authorities in different countries, the creation of a supervisory college on these groups it would determine significant benefits both in periods of stress and in normal market conditions;
– Create an integrated data hub shared by market supervisory authorities and central banks, which responds to the needs of both, both in terms of daily supervision and stress-testing exercises.
Rome, 15 April 2024
Consob source
