10 June 2019

Financial Times: Sweeping reform needed after Brexit, says French regulator

One of France’s top financial regulators has called for sweeping changes to Europe’s investment rules in a speech that emphasised the profound challenges awaiting the UK’s finance industry after Brexit.

The UK will lose its ability to influence development of European financial regulations at a time when France is pressing for a tightening of the supervisory framework for investment companies across the continent.

Robert Ophèle, chairman of the Autorité des Marchés Financiers, the French financial regulator, said Europe’s financial landscape would be “profoundly transformed” by the UK’s exit from the EU.

“As a new European legislature opens and as the UK leaves the EU, the time is ripe to think about the main areas of work and principles that should guide the action of EU legislators and regulators for the coming years,” said Mr Ophèle, speaking last week at a conference in London hosted by the Futures Industry Association.

The French authorities have previously criticised the European rules covering delegation, where asset managers domicile funds in one country and locate investment functions in another.

Paris is believed to have been behind an EU push two years ago to make the delegation rules stricter in a bid to capture a slice of the UK’s £7.7tn asset management market. This failed after resistance from other EU countries. Mr Ophèle’s speech has revived the spectre of a fresh push by France to win business from the City of London.

Mr Ophèle said the forthcoming reviews of the Ucits retail fund rules and the Alternative Investment Fund Managers Directive “provide opportunities to strengthen the consistency of regulations”, including the rules covering the practice of delegation that sits at the heart of global asset management operations.

[...]Brexit meant that it would be “essential to review existing third-country regimes,” said Mr Ophèle. [...] Mr Ophèle said national supervisors needed to develop “a more collegiate approach” to prevent financial players exploiting gaps in regulations by “jurisdiction shopping”. [...] 

The regulatory framework, said Mr Ophèle, was “difficult to understand”, particularly because the implementation of the rules could vary from one member state to another.

He called for a redesign of the European rules governing asset management to ensure “greater readability and convergence”.

Julie Patterson, the leader on asset management regulatory change at KPMG, the professional services provider, said: “We are seeing the AMF growing in stature, looking to lead the debates and discussing regulatory wider issues.”

Mr Ophèle also called for the rules governing eligible assets — the securities that retail funds are permitted to invest in — to be “reviewed and modernised”. [...]

Full article on Financial Times (subscription required)

© Financial Times