The European Fund and Asset Management Association (EFAMA) has railed against the European Commission’s proposals to introduce centralised supervision for capital markets.

EFAMA has published a report promoting passporting regimes ahead of the EC’s plans to announce new legislation on centralised supervision by the end of 2025.

The EC published a consultation paper on its Savings & Investments Union (SIU) Action Plan earlier this year, which EFAMA said promotes “complex supervisory ‘constructs’ with unclear rationales”.

The EC has proposed three ways to oversee large cross-border asset managers – supervisory colleges, joint supervisory teams, and direct ESMA supervision – but EFAMA maintains the current supervisory model is the most suitable for the asset management industry.

EFAMA said centralised supervision will not address the cross-border barriers in the current supervisory framework, based on the UCITS and AIFMD passporting regimes, because they are caused by national rules and market differences rather than supervisory differences.

In its report, Asset management supervision: why passporting remains the best supervisory model for Europe, EFAMA said there are three main reasons why centralised supervision will not improve supervision in the asset management sector:

  • The European Securities and Markets Authority (ESMA) lacks the necessary resources and expertise to supervise (large) cross-border asset managers effectively.
  • Direct ESMA supervision would result in a double layer of supervision if management company supervision migrates to the EU level, while product supervision remains at the national level.
  • Diverging views across supervisory college members would delay the decision-making process and negatively impact asset managers’ ability to respond to market demands and market stress.

EFAMA said it would be better to focus on simplifying data-sharing arrangements and improving cross-border fund distribution

Vincent Ingham, director of regulatory policy at EFAMA, said: “There is a strong consensus among asset managers – large and small – to preserve a supervisory model that has contributed to building the single market for investment funds.

“Our report clearly shows that increased centralisation of asset management supervision would not lead to better supervisory outcomes, nor would it substantially contribute to the SIU objectives.”

He added: “That is why EFAMA strongly recommends prioritising other policy initiatives that have the potential to scale up EU capital markets and boost retail investments, and focus on targeted improvements to the current supervisory framework, notably through better data-sharing and more effective use of existing supervisory convergence tools.”