CNMV calls on managers to lobby against tighter EU fund regulation

Market watchdog asks Spanish fund managers to protect their interests in the face of increasingly lively debates at European level, which require stricter regulatory measures similar to those in the banking sectorbefore pleasantfor the possible shock driven by vulnerabilities in the sector that impact financial stability.

Rodrigo Buenaventura,President of the National Securities Market Commission (CNMV)came out again in defense of investment funds in Spain, emphasizing the idea that this a sector entirely different from banking, and warns of the consequences that increased regulation will have on the nation’s governance sector.

“It’s amazing how much of the international debate is about financial stability risks and whether additional macroprudential measures will be needed for funds,” Buenaventura explains in an interview during the Fourth of July celebrations. XXXV Expansion Fund and Allfunds Awards celebrated yesterday.

The Spanish Market Controller refers to constant notifications received for more than a year about a possible problem with liquidity in the investment fund market which could threaten financial stability given the sector’s rapid growth in Europe. Non-banking financial sector, also known as shadow banking– comprises investment funds, pension funds and insurance funds, capital and risk funds grew rapidly after the financial crisis. Its weight in the eurozone has increased from 15 billion euros to more than 31 billion.

Critics of the sector argue that it remains as vigilant as before the boom, while Traditional businesses are increasingly regulated.

“I think it is important, on the one hand, to defend the idea that funds are very different from banks and that regulation should not be the same,” – says the President of CNMV: “And secondly, to ensure that the voice of the Spanish sector is heard in the discussions that are currently taking place in the European Union and which can have a very significant impact on Spanish management companies.”

Requests

Different voices at European level demand, among other things, create stress tests to control the liquidity of investment funds or impose liquidity buffers on them as tools to enhance surveillance of these products.

Luis de Guindos, Vice President of the European Central Bank (ECB)), was one of the most critical voices and repeatedly demanded Supervision of non-bank financial institutions needs to be strengthened, including investment funds. According to him, there are structural weaknesses in the sector that, without proper control, could jeopardize its survival in times of crisis.

Accuracy

This is not the first time Buenaventura has defended the sovereign wealth sector and asked European authorities to provide more detail and precision when they criticize its vulnerability.This is the first time that the president of a supervisory authority has directly asked the sector to protect itself from the consequences that could arise from tighter supervision. by funds to equate it to the banking system.

A few months ago, in an interview with EXPANSIÓN, he said: “We are seeing approaches that call into question the stability of parts of the financial system that are sometimes defined very roughly. In my opinion, will add little to the discussion unless we clarify what type of vehicle we are talking about.

“It is important that we are as precise as possible when dealing with financial stability issues, since 12 million Spaniards buy traditional funds. Questioning their stability would be irresponsible. If we look at the Spanish stock sector, there is very little cause for concern in terms of financial stability and liquidity. Leverage is very low and the stress tests we run every year show it can withstand much higher withdrawals than the worst week of Covid. before starting any small problem. Moreover, the Spanish stock sector, unlike the banking sector, has not caused any problems in recent years.”