The argument for greater centralisation is set out in a post on the ECB’s blog, co-written by staff members including Michael Wedow, deputy head of the ECB’s financial regulation division, and Pierce Daly, a financial stability expert who was previously an economist at the Central Bank of Ireland.
The officials argue that Europe’s largest asset managers serve investors across the EU but are supervised at national level. They say that creates risks.
A European approach to their supervision could also foster cross-border financing, they say.
The blog post questions the robustness of the existing regulatory regime, though without providing any evidence of specific risks.
“Nationally fragmented oversight leaves room for supervisory blind spots,” the ECB staff said.
“A more European supervisory framework would ultimately strengthen the sector’s resilience.”
The blog post does not represent the official stance of the ECB, but is likely to be read as tacit support for a policy that the funds and asset management industry has been resistant to.
Any push for a change will be watched particularly closely in Luxembourg and Ireland.
The funds and asset management sectors are big employers in both countries thanks to relatively more favourable tax and legal regimes, as well as historic build up of professional expertise.
Governments in both countries will be wary of any changes that threaten their competitive advantage.
The ECB blog argues that a common supervisory regime would lower costs for savers and for industry and would be in line with the drive for a European Savings and Investment Union.
A “more consistent EU framework could level the playing field in the application of European rules and help remove barriers to cross-border fund distribution,” they say.
The post backs an expanded role for the Paris-based European Securities and Markets Authority, or ESMA, including as a coordinator of multi-country supervisory “colleges” that would oversee the largest asset management firms.
Industry sources in Dublin questioned the value of a regulatory shake-up, including whether it would increase costs that would ultimately be borne by asset owners or, for instance, borrowers tapping the sector.
Large asset managers are already subject to a common regulatory regime, regardless of where funds are domiciled, they pointed out.
Asset managers already operate cross-border both in terms of drawing in investment and in how funds are allocated, despite many being domiciled in Luxembourg or Ireland.
Around 90pc of assets managed in Ireland, a key element of the international financial services sector here, are owned overseas and invested elsewhere.
The EU lobby for asset managers, EFAMA, said last year that it was opposed to a shift to a single supervisor, in part because it will add a new layer of costs.
“ESMA lacks the necessary resources and expertise,” EFAMA said, and the new mandate would likely also end up creating “a double layer of supervision”.
The largest 10 to 15 groups in the sector dominate the European landscape with about €6.3tn in assets under management. The very largest, Blackrock, is heavily concentrated in Ireland.
The call for more consolidated supervision in the area is part of a wider push.
The EU Commission in December unveiled a plan to transfer greater supervisory and enforcement powers over significant clearing houses, central securities depositories and trading venues to ESMA. The proposal also included “enhancing ESMA’s coordination role for the asset management sector”.
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