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Lawmakers in the European Parliament voted to water down a bill that would have given the European Securities and Markets Authority additional oversight of the industry’s global operations. The draft law endorsed by the Economic and Monetary Affairs Committee instead gives regulators a more limited role to make recommendations on the oversight of firms.
At issue are delegation and outsourcing, which mutual funds routinely use to run their business across borders. EU national regulators authorize and supervise funds that delegate activities to offices outside the bloc. Since the Brexit referendum in 2016, the EU has moved to tighten oversight of asset managers, warning that they won’t tolerate “letterbox entities,” which are based in the bloc, but outsource the vast majority of their business to operations in London, New York and elsewhere.
The move is part of a broader overhaul of the EU’s financial supervisors, which also incorporates a response to recent money-laundering scandals in the bloc. Lawmakers agreed to hand the European Banking Authority additional powers, including the ability to intervene in the supervision of banks if EU rules aren’t being followed.
The legislation approved makes clear that national -- not EU -- regulators are ultimately responsible for the fund industry’s operations, as is the case now. Talks on a final version of the legislation will begin when EU member states have settled on their own position.