29 January 2016

ALFI response to Commission call for evidence on EU regulatory framework for financial services

It is important to see and understand that EU regulatory changes have a marked impact on the capacity of the EU to attract financial sector activities and hence generate new employment opportunities.

Further EU regulations often do have an extraterritorial impact which needs to be taken into account. A good example are the remuneration rules under the AIFMD and UCITS. Managers in non-EU jurisdictions such as notably the USA and Asia have considerable difficulties to internalize the EU specific remuneration concepts and see this as an obstacle to establish investment vehicles in the EU.

Yet another issue is that the delimitations between sectors which the EU regulations purport to cover, such as “insurance”, “investment funds”, “debt issues” etc. are sometimes artificial leading to more granular, or at least different, regulations, for products that fulfil the same or very similar economic purposes. PRIIPs is a good initiative to overcome such difficulties and this should serve as an example to be followed, even though PRIIPs may have the one or the other weakness itself.

More generally, rule making needs to revert to a more principle based level. Experience shows that too detailed rules will not be able to cope with technical change and innovation. The regulatory challenges of a change from more traditional ways to communicate and interact to the new internet based economy cannot be mastered but by way of principal based rule making.

Implementation timelines have in the past sometimes been a moving target and it would be preferable to have from the beginning realistic timelines that take as well the need of Level 2 regulations into account.

More generally regulatory stability as such is of great importance, notably having regard to the global functioning of the financial markets. Too many and rapid adaptations is definitely an inhibition for non EU players with respect to engagement in the EU.

Full response

© ALFI - Association of the Luxembourg Fund Industry