The European Fund and Asset Management Association (EFAMA) has asked macro-prudential supervisors to rethink investment fund risk.
The association made the request in a report that provides an overview of the contribution of the European investment fund sector to the diversity and resilience of capital markets.
The report finds that the investment fund sector is “not systemically relevant, despite the possibility of risks that require further attention from macro-prudential supervisors."
In the report, EFAMA identifies a flaw in the Financial Stability Board's (FSB’s) Non-Bank Financial Intermediation (NBFI) methodology to find “economic activities that may give rise to systematic risks.”
In addition,EFAMA outlines the need for a successful Capital Markets Union in Europe to further grow the investment fund sector.
The association says European policymakers “have a good grasp of the realities of the fund market and are addressing liquidity management appropriately within AIFMD/UCITS review. However FSB recommendations on open-end fund liquidity management are problematic on more than one count.”
Tanguy van de Werve, director general at EFAMA, comments: “Over the last 15 years, we have all felt the impact that financial crises can have on our daily lives, and systemic risks are not to be taken lightly.
“Through this publication, EFAMA shows its commitment to contribute to the policy debate on systemic risks in the investment fund sector. A key takeaway is that the current NBFI agenda clearly requires a rethink on the use of macro-prudential supervisors.
He adds: “We must remain vigilant for real systemic risks that could threaten our financial system, correct where necessary, and avoid fixing what is not broken.”
