Response to Call for Evidence on the EU Regulatory Framework for Financial Services1 February 2016
In response to the financial crisis, the EU engaged in a period of intensive rule-making in the area of financial services over the past five years. Recognising the importance of striking the right balance between reducing risk and enabling growth, the Commission launched a comprehensive review of EU financial services legislation in September 2015. This ‘Call for Evidence’ calls on stakeholders to provide evidence-based input relating to unnecessary burdens, inconsistencies, gaps, unintended consequences and gold-plating in EU regulation. The Call for Evidence forms part of the EU’s objective to build a genuine Capital Markets Union (CMU) across Europe by 2019 and was published in September 2015, in conjunction with the CMU Action Plan.
Irish Funds has welcomed the Commission’s invitation to review the EU’s regulatory framework for financial services in its entirety in order to bring greater coherence, clarity and efficiency with a single rulebook and crucially, to enable the Capital Markets Union project to succeed. Irish Funds highlighted key concerns relating to the EU policy and legislative process which have left industry grappling with unrealistically tight deadlines, coupled with delays in the detailed implementing measures and the issuing of accompanying guidance. Irish Funds has called for a period of regulatory stability following the comprehensive changes made to the regulatory framework in recent years and stressed that future changes to EU financial services legislation should only be made in line with a joined-up approach to policy making.
In order to address issues being encountered and facilitate CMU, Irish Funds has called for a range of measures, including:
- An integrated regulatory reporting strategy and a single coherent, streamlined reporting framework with reporting via a single EU portal to create efficiencies and enable better access to and monitoring of data by regulators and policy makers
- Enhancements to the cross-border marketing process, including the creation of a single EU passport notification portal, the imposition of a maximum fee range regulators can levy and the development of a common definition of marketing under AIFMD
- Clarification on the entitlement of EU resident investment funds to tax treaty benefits, particularly in the context of the OECD’s BEPS project
- Recognition of the important role of money market funds in CMU and the need for a proportionate solution for constant NAV (“CNAV”) money market funds under the proposed Money Market Fund Regulation
- A common European framework for loan origination funds and the removal of barriers to non-bank lending in order to achieve the goal of increasing non-bank finance via the capital markets
- Clarification of the rules regarding depositary location in the context of the third country passport in order to enhance protection for European investors
- The introduction of a new EU category of “semi-professional investor” within AIFMD or ultimately under the MiFID framework in order to appropriately broaden the investment horizon for such investors and in order to further diversify the supply of funding to long-term financing using vehicles, such as the European Long-term Investment Funds (ELTIFs)
- Appropriately clarify the asset segregation rules under AIFMD in recognition of the globalised environment in which EU cross-border funds operate as well as the treatment by depositaries of intermediary Central Security Depositories (CSDs) in relation to the services they provide
- Address overlaps, duplications and inconsistencies in the rules relating to financial services remuneration across the various legislative frameworks