IMA warns ESMA that asset managers need a different approach than banks

The UK’s Investment Management Association (IMA) has reminded the European Securities and Markets Authority (ESMA) that asset managers are not banks, and should not be treated as posing the same systemic risks.

In its response to ESMA’s consultation paper “Guidelines on Sound Remuneration under AIFMD” the IMA said any remuneration policies for asset management firms must take account of this important difference ,and must be proportionate to any risks posed.

“In addition, there is a patchwork of regulation on remuneration, meaning that many asset management firms will have to comply with not just one but four sets of EU guidelines,” a statement from the association, which represents the UK’s £4.2trn retail and institutional asset management industry.

The IMA favours instead a broader principles-based approach which would allow firms the flexibility needed to fit in with the circumstances in which they operate.

Guy Sears, IMA’s wholesale director, noted that one of the roots of the financial crisis was the huge bonuses paid by banks for short-term highly risky transactions.

“This is in complete contrast to the more forward-looking incentive plans of asset managers whose aim is to reward longer-term profitability. It is right that remuneration plans should be regulated but this type of prescriptive approach misses the point.”

The full IMA response is available here.

Sears has been outspoken on the growing burden of regulation on asset management businesses, on which national authorities are relying to help channel and manage savings for retirement. The IMA has identified over 30 measures of concern, starting with the reach of regulators beyond an individual firm.

“Asset managers are significant users of services provided by other,” Sears notes.

“Some services are outsourced. They may include valuation services and transfer agencies. Others relate to the significant role the buyside has in the capital markets.”