With UCITS V coming into force in a matter of weeks, banks are generally welcoming, and in some cases exceeding, requirements for the regulatory update, according to a panel at the Association of the Luxembourg Funds Industry (ALFI) Spring Conference.
From a depository bank’s point of view, Jean-Marc Crepin, a partner at Brown Brothers Harriman, said: “UCITS V has led to an improvement of the operational risk framework that a depository bank has.”
Although banks complained a lot, he said, they understand the reasons for the regulations, and welcome industry standards that protect investors.
He also pointed out that some parts of the regulation, such as cash flow monitoring, although new in a regulatory sense, banks already had these processes in place. These original processes may have required some adapting, but the changes didn’t require too much effort.
With regards to client onboarding rules under UCITS V, Judith Robinson, managing counsel at BNY Mellon, highlighted the importance of exercising due diligence and working in partnership with the client.
She said that procedures should be in place to understand what the client wants from the investment, to identify market coverage and investment strategies, thereby ensuring that a bank can provide the service the client requires. She stressed that the process is “a dialogue with the client”.
Crepin agreed that the relationship between clients and depository banks should be a partnership, specifying that relationship managers are “the first line of defence”, and an important part of the bank’s culture.
He added that regulations are not necessarily set in stone, suggesting that institutions should take into account the ‘spirit of regulation’, going above and beyond the specific requirements, if they deem it necessary in order to protect the client.
“It’s a more collaborative, transparent process now,” said Robinson, adding that it is clearer where the assets of a fund actually are. Although some aspects of UCITS V still need to be smoothed out, such as the rules around collateral management, she said the regulation is generally a positive thing.
Moderator Marc-André Bechet, ALFI director for tax and legal, concluded with a simple warning ahead of the 18 March UCITS V implementation, telling attendees simply: “Be ready on time.”
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