European Commission DG MARKT Unit 02 Rue de Spa, 2 1049 Brussels Belgium markt-consultation-shadow-banking@ec.europa.eu 14 th June 2012 Natixis Asset Management Response to the European Commission Green Paper on shadow banking Natixis Asset Management ( NAM ) is grateful for the opportunity to comment on Commission's shadow banking green paper seeking to create a binding legal framework likely to be applied to shadow banking activities and entities. Natixis Asset Management is one of Europe s leading asset managers with 293 billions Euros of assets under management and which is mainly specialized in Fixed Income, European Equities and Investment Client solutions. NAM is also an active member of the French Association of Asset Managers AFG at a national level and of the EFAMA at an European level. Regarding the Shadow Banking Green Paper proposed by the European Commission, NAM fully supports EFAMA s response provided and wishes to express its agreement especially on the following points: 1. The broadness of the Shadow banking definition proposed by the European Commission. 2. Asset Management industry in Europe should not come under the scope of «shadow banking» due to the existence of relevant regulations with respect to investment funds. 1
1. The broadness of the Shadow banking definition proposed by the European Commission As the EFAMA underlined it in its comments, we strongly believe that the definition of shadow banking proposed by the EU Commission is not suitable. According to the FSB report released in April 2011, it seems that the international community were in agreement to define the shadow banking as a system of credit intermediation that involves entities and activities outside the regular banking system, and raises i) systemic risk concerns, in particular by maturity/liquidity transformation, leverage and flawed credit risk transfer, and/or ii) regulatory arbitrage concerns 1. Except that the definition proposed by the EU commission including a large range of regulated entities as certain investment funds doesn t comply with the definitions proposed by the FSB given that the lack of regulator arbitrage, or the lack of systemic risk. 2. The Existence of relevant regulations with respect to investment funds in UE : ETF and Money Market Funds cases It is clear that certain shadow banking becomes more and more important in international financial transactions and are therefore an important factor of financial instability. Nevertheless as EFAMA pointed out the shadow banking entities and activities as they can be defined by the EU Commission are likely to apply to activities and entities already covered by strong national and European Regulations. It s the case especially for investment funds like ETFs and Money Market Funds which fall into the scope of the definition proposed by the EU Commission but which are however subject to UCIT regulations and CESR/ESMA guidelines and a strong risk management process lead internally by asset managers. In addition when a fund doesn t comply with UCIT directive, it will be highly likely to fall under the scope of AIFM Directive. 1 Shadow Banking: Scoping the issues, A background note of the Financial Stability Board, 12 April 2011, pp. 2-3 2
Thus it would be inefficient to seek to strengthen the applicable legal framework applicable to such entities As a Conclusion: We support the initiative taken by the EU Commission to regulate the Shadow Banking System but to a certain extent, as set forth in EFAMA s response ( reproduced here ). The limits being mainly the non compliance to the global approach lead by the FSB, and the care to regulate only where there s an obvious lack of regulation implementing a real legal binding framework. 3
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