LONDON (Reuters) - European Union proposals to reform financial supervision in the bloc are likely to be rewritten to avoid harming how mutual funds based in one country are run by asset managers located in another, Luxembourg’s finance minister told Reuters.
Asset management industry bodies in Europe and the United States have warned that the EU plans would disrupt cross-border operation of funds, a longstanding global practice known as delegation.
“Putting into question the whole issue of delegation was an attempt to ring-fence the EU single market,” Luxembourg Finance Minister Pierre Gramegna said during a visit to London.
Luxembourg is one of the bloc’s top listing centres for funds, but the bulk of them are managed in Britain, Asia and the United States.
The Grand Duchy has pushed hard to change the draft law.
“I think there is going to be a rewriting of some of the key articles in that regulation,” Gramegna said, referring to the draft EU law proposed by the European Commission.
“Negotiations are going on with the European Commission to change some aspects of it so the regulation does not become detrimental to the good functioning of the funds industry worldwide.”
Asset managers in Britain manage 1.4 trillion pounds ($1.91 trillion) on behalf of European clients.
British regulators fear that Britain’s departure from the EU next year will be used by some EU states as an opportunity to force UK asset managers to move to the continent by restricting delegation.
Andrew Bailey, chief executive of Britain’s Financial Conduct Authority, said last week that it would not be sensible to require a fund to be managed within its domicile.
“The truth is that delegation is a well-established global norm, underpinned by strong standards and regulatory cooperation,” Bailey said.
“It is not dependent on EU membership. There is no reason to disrupt a system that clearly works effectively.”
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Reporting by Huw Jones; Editing by David Goodman