04 May 2012

Barnier: Asset management, the key to intelligent financial regulation

(Translated from the French)

I would like to speak about three priorities for the coming months, all of which relate directly or indirectly to the asset management sector.

I - Direct funding to the real economy

SMEs, which form the backbone of European economy and are responsible for 85 per cent of net job creation in Europe, are often difficult to develop, particularly the lack of access to finance. We also proposed measures to ensure that social entrepreneurship funds are better identified and are able to raise capital across the whole of Europe. Savings should be orientated towards new sectors, those not on our radar screens because their economic contribution is greatly underestimated, for example the social economy.

With these two proposals for EU funds - venture capital and social entrepreneurship - the progress in the Council is on the right track. The Danish Presidency will begin the trialogue with the European Parliament in the coming weeks and we hope that the two measures can be adopted as early as July.

II - Shadow banking regulation

In 2010, this sector of non-bank credit activities accounted for €46,000 billion, or between 25 and 30 per cent of assets managed by the entire financial system. These activities, which are growing, are not subject to regulation or enough to prudential supervision.

• First, we must ensure that the new rules we put in place will not have the effect of encouraging certain banking activities to migrate to the unregulated sector.
• Secondly, we must be careful not to penalise players who, in this shadow banking system, play an important role in financing the real economy. Especially in these difficult times for the European economy in a context where banks have to meet more demanding prudential ratios.

III - Protection of investors and consumers of financial services

In the coming weeks, we will propose three key initiatives:

1. First, we want to protect consumers of retail investment products (PRIPS) better. Today, the complexity and opacity of these products is that consumers buy them too often against their interest. We want to remedy this through better information for investors - for example an information sheet identical for all types of PRIPS - and stricter rules for sellers of financial products.
2. Next, the Madoff fraud in the United States, in which Europeans have lost money, showed flaws in the UCITS regulation. We want to protect those who invest in these products by introducing stricter liability for loss of financial instruments that are held in a custodian bank. It is also a way to bring the custodian arrangements of the UCITS Directive to the AIFM Directive.
3. Finally, we want to protect consumers of insurance products, including establishing a level playing field between different vendors of these products, such as insurance companies, but also banks and brokers.

Full speech (French only)

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