Britain, Germany and France on Tuesday won their battle to allow mutual funds to manage European operations centrally and save money, a move that dismayed Luxembourg and Ireland.
“We are talking about people holdings savings for millions of Europeans,” Christine Lagarde, finance minister for EU president France, told a meeting of the bloc’s finance ministers. EU Internal Market Commissioner Charlie McCreevy proposed the sweeping reform of how pan-EU mutual funds can operate in a bid to make the sector more efficient and give investors a wider choice of lower-cost funds. “The investor will have greater diversity of products and lower cost. It will ensure proper protection of investors thanks to better supervision,” Lagarde said.
The so-called undertakings for collective investment in transferable securities (UCITS) draft law updates EU rules overseeing cross-border mutual funds sold across the 27-nation bloc. It would allow funds in the €6 trillion retail sector to merge and pool resources more easily and list quickly. McCreevy proposed his reform to the European Parliament and EU states for adoption but, faced with opposition from Ireland and Luxembourg, left out a widely anticipated core element -- a so-called management company passport. A passport, added by EU states and parliament to the latest version of the reform, would allow a fund in one country to manage the funds it has dotted across Europe without having to open offices in each of those countries. Ireland and Luxembourg are major centers for listing funds and home to companies that provide back office services.
The two countries said managing those funds from elsewhere would fragment supervision but critics argue the two simply fear losing business to London, Frankfurt and Paris where many large, cross-border funds have their base. “Luxembourg did support the Commission’s initial proposal but now we have the management company passport we have to keep our reservation,” Luxembourg’s Economy Minister, Jeannot Krecke, told the meeting. Ireland also said it had concerns.
Parliament’s economic and monetary affairs committee was also due to back the introduction of a management company passport in a vote on Tuesday. The aim is to have a final joint deal between EU states and parliament in time for the assembly’s first plenary vote early next year. (Reuters)