- Fund Regulation
- Retirement Security
- Trading & Markets
- Fund Governance
- ICI Comment Letters
Institute Comments on Proposed EU Capital Requirements
Washington, DC, January 30, 2003 - The Institute stated that it would be inappropriate to subject asset management firms to bank-style capital requirements for operational risk, in a recent letter to the EU Commission on its Working Document on Capital Requirements for Credit Institutions and Investment Firms. The Commission’s Working Document is intended to provide the basis for a dialogue on how best to reflect the new Basel Accord, which is scheduled to be adopted in the fall of 2003, into a revised EU capital adequacy framework. The Commission is expected to issue the final consultation paper on a proposal to revise the Capital Adequacy Directive in the summer of 2003.
The Institute states that the justification for bank-style capital requirements does not apply to the asset management industry, that there are better ways than capital requirements to protect asset management clients, and that high capital requirements in asset management have anticompetitive effects.
The Institute also states that, should the Commission determine to impose bank-style capital requirements on asset management firms, it should:
- apply a lower calibration for imposing capital charges for operational risk on asset management than for banks and
- permit firms to offset capital with insurance.
To assist the Commission in recognizing insurance, the Institute will provide data on the US industry’s experience in using insurance to cover certain operational risks.