Commission consults on investment funds
By Manon Malhère | Thursday 26 July 2012
The European Commission intends to zero in on the interaction between shadow banking and investment funds. It launched a consultation on the subject, on 26 July
The executive will use the results to provide input for work under way on shadow banking, the subject of an earlier broad consultation (see
Shadow banking comprises credit entities and activities that are not part of the traditional banking system. It includes money market funds, investment funds (including funds traded on securities exchanges and speculative funds) and insurance and reinsurance companies.
In its consultation, the Commission invites stakeholders to answer eight specific questions, in particular on money market funds. These are funds in which investors like households, corporate treasurers or insurance companies invest for the short term and are considered relatively safe investments, according to the Commission. Money market funds are an important source of financing for states, banks and businesses.
Any ‘runs’ by investors on money market funds could have systemic repercussions, which is why their liquidity profile is particularly important. The consultation therefore invites stakeholders to give their views on the role of these funds in investors’ liquidity management, their systemic importance in financial markets and their activities (for example, the types of assets in which these funds invest the most).
The Commission also explores the use of efficient portfolio management (EPM) techniques by managers of undertakings for collective investment in transferable securities (UCITS), which are regulated by EU law. EPM includes securities lending and pension transactions. The Commission invites stakeholders to give detailed views on the subject (types of transactions considered as EPM techniques and related risks) with the aim of understanding the impact of their use on investors and more generally on the system.
The consultation also addresses the problem of long-term investments. Stakeholders are asked in this case about the measures needed to promote such investments.
The consultation will run until 18 October.
The executive will use the results to provide input for work under way on shadow banking, the subject of an earlier broad consultation(1) The consultation is available at ec.europa.eu/internal_market/consultations/2012/ucits_en.htm