Luxembourg needs to take five crucial steps to realise the potential of the capital markets union (CMU), said a panellist at the Association of the Luxembourg Funds Industry (ALFI) Global Distribution Conference.
Claude Niedner, a partner at Arendt & Medernach in Luxembourg, said that the first step should be to “be supportive of credit funds”, adding that the jurisdiction should look at alternative investment funds and managers more flexibly.
It should also focus on “risk management”, which Niedner pointed out was at the centre of many regulations. CMU has also prompted discussion of peer lending, and Neidner suggested that Luxembourg should consider creating a financial sector that supports this.
He called for a “pragmatic approach for regulatory perspective” and minimal pressure on fund managers to comply with regulation. Finally, he suggested that the industry should focus on unregulated funds, taking in to account the fact that currently, fund managers are regulated, but the funds themselves are not.
The panel also addressed the possible implications of CMU, with moderator Jonathan Griffin, managing director of J.P. Morgan Asset Management, drawing attention to the fragmentation between EU member states, and suggesting that there is a need for stability.
Another speaker, Stephane Giordano, a senior advisor for regulatory strategy for Societe Generale Global Banking and Investor Solutions in Paris, said that while harmonisation would be ideal, “if we want to go for maximum harmonisation that will take ages”. He suggested that instead, the aim should be to achieve as much harmonisation as is practical
Generally, the panellists were supportive of urging the European Commission to ‘take stock’, and agreed that the main focus of the CMU debate should be on the result for the end investors.
Neidner pointed out that while regulations are designed to protect investors, if they are too protected from risk, they could miss out on investment opportunities.
Giordano also referred to the “regulatory tsunami”, saying that the objective was to make the markets safer. Now, a more balanced approach to regulation is required—it is “not sensible” that small and medium enterprises are subject to the same regulations as large firms, and in some cases the level of regulation is too high, he said.
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