Ladies and Gentlemen,
Thank you very much for inviting me to join you on this special occasion of your annual dinner. The timing is perfect. Because many issues of interest to you are being finalised at the moment. We all agree that Europe needs a sound and efficient asset management industry.
To help institutions and households accumulate capital to meet future needs.
To manage and diversify risk.
To ensure that capital is put to its most productive uses.
That is why we believe so strongly in an efficient and innovative fund industry, attuned to the needs of its traditional retail investor base.
The real debate is about how we get there.
We have an existing legislative framework. Let us build on that. There is a lot that we can do through targeted and calibrated adjustments to the existing legislation.
To give the industry the space to develop and consolidate.
To unleash the competition which drives product performance and innovation.
And to ensure that savings are passed on to investors.
Let me sketch out our current work to complete a functioning single market framework for investment funds - including money market funds.
Recent developments in investment funds
The European single market for investment funds is incomplete. We need to correct the weaknesses of the fund passport. Do more to allow fund managers and administrators to serve this fast-growing market as efficiently as possible.
Since I came to office, we have stepped up our efforts to ensure the consistent implementation of the Directive. To remove administrative and regulatory frictions which slow down cross-border market access and lead to missed commercial opportunities. This week has seen further proof of this commitment at work. First, we published an interpretative Communication which makes clear that host country authorities have only very limited scrutiny powers when UCITS are notified for sale in their country. Second, we adopted legislation which establishes a common understanding of whether certain assets can be held in a UCITS portfolio. Working with the grain of the market. It seeks to accommodate UCITS investment in a wide range of new asset classes subject to compliance with some basic principles. This will provide legal certainty and easy passporting for UCITS money market funds investing in euro-commercial paper and most asset-backed commercial paper. We believe this will help businesses trying to do business in other Member States.
Follow up White Paper
However, consistent implementation of the existing Directive will only take us so far. The Directive as it stands needs to be enhanced in a number of respects. The Commission White Paper of last November set out the changes that are urgently needed:
- removing unproductive host country interference in the fund pass-porting procedure;
- supporting consolidation of the fragmented fund industry through mergers and asset pooling;
- exploiting specialisation advantages by allowing fund managers to manage funds on a remote basis;
- transforming the Simplified Prospectus from a bloated legal text into short and useful investor disclosures.
Today we made public our initial views on how best to give effect to these objectives. We are hoping for feedback from regulatory bodies, market participants and other stakeholders on the following questions:
- will the envisaged provisions achieve the desired result?
- Are they coherent with the overall UCITS framework and related legislation?
- Are there any unintended consequences for stakeholders – particularly investors?
- Could the envisaged solutions be improved from a cost-effectiveness perspective?
This consultation is a further expression of the Commission's real commitment to better regulation and transparent law-making. Therefore, we count on IMMFA and you all to contribute. The deadline is early June.
We are also organising an open hearing in Brussels on April 26th to exchange views on the relevance and effectiveness of the envisaged solutions. The Commission's final proposal will be finalised towards the end of 2007.
An effective single market framework for investment funds will help the industry to remain at the cutting edge globally. But the challenges do not stop there. Fund management is no longer the quaint cottage industry of the early 90s. It is big business. Undergoing massive structural change. A profession being reinvented. With new investment styles. Business models being turned upside-down. And competition between funds and other financial instruments becoming keener.
One new area is whether there is a need to provide single market solutions for some/all non-harmonised funds. Now over 20% of assets under management. Do we mean cross-border access to the mass market for some non-harmonised products? Or arrangements to allow private placement of funds and other instruments with sophisticated investors.
These are longer-term projects. But our open working methods will be the same.
Lamfalussy process
The Lamfalussy structure has been in place for 5 years now. The time has come to give it a check-up this year.
The most significant achievements of the Lamfalussy process have been related to its legislative phases. In accordance with the original aims of the 2001 Lamfalussy report legislative blockage has been replaced by legislative advantage; and, the quality improved.
But there is more to do in terms of day to day transposition and cooperation between national supervisors. I believe in evolution and not revolution. We are considering how to make this work better.
Transposition and gold-plating Community law
I am not satisfied overall with Member States' performance when they transpose European legislation.
First, too many Member States are late. MiFID being the latest example.
Second, the gold-plating. I.e. regulatory additions tacked on by Member States when they implement European Directives. The Commission has cut back its regulatory activities. But Member States must do the same. That is why I cannot accept gold-plating as a common European practice.
These supplementary provisions generate a major obstacle for the functioning of the pan-European integrated market. Ratcheting up costs to industry. Fragmenting the rulebook. Goldplaters should seek alternative employment: dentistry or jewellery. Not regulation.
We are using another powerful tool: "naming and shaming". Member States' transposition performance in the financial services field can now be followed on-line on our website. Check it out. And moan loudly if you see delays.
The strongest tool we have is infringement proceeding. In short. Court action.
Conclusions
I hope that I have updated you sufficiently on our work in the asset management field as well as provided good insight into the issues around the Lamfalussy process, and that this will keep you following the Commission's activities in these areas. I look forward to your continued interest and support in developing pragmatic and constructive solutions to demonstrable problems facing you in your day-to-day business. I encourage you to share with us your experience and expertise wherever possible. Our aim is to build the best regulatory framework in the world.
Thank you.
