GREEN PAPER COMMENTS PRESENTED BY CREDIT AGRICOLE SA AND CREDIT AGRICOLE ASSET MANAGEMENT (SEC(2005) 947)

Transcription

1 GREEN PAPER COMMENTS PRESENTED BY CREDIT AGRICOLE SA AND CREDIT AGRICOLE ASSET MANAGEMENT (SEC(2005) 947) 1- Presentation of Crédit Agricole and CAAM Crédit Agricole belongs to the top three largest banking groups in Europe in terms of total assets and total equity (source : The Banker, July 2005). Credit Agricole Group consists of : 41 regional cooperative banks, which are ultimately owned by 5.7 million members of local credit cooperatives, Credit Agricole SA which is a listed company and acts as the central body of the Group and the holding company of national and international subsidiaries, A full array of companies specialized in banking and insurance business lines, among which Credit Lyonnais, Sofinco (consumer finance), Predica (life insurance), Pacifica (non-life insurance), Crédit Agricole Asset Management, Credit Agricole Investor Services (custody), and Calyon (corporate and investment banking). The Federation Nationale du Credit Agricole (FNCA), which acts a representative body of Credit Agricole regional banks. In France, with over 20 million clients, Credit Agricole Group is the leading bank in terms of deposit taking and lending, and the second largest life insurance company. In addition, the Group has built a genuinely pan-european business out of its main subsidiaries, mainly in consumer finance, asset management and private banking, and a network of strategic alliances and partnerships with other major European banks. In corporate and investment banking, the Group is active in 60 countries through Calyon, its wholesale banking arm. Crédit Agricole Asset Management (CAAM) is part of the Crédit Agricole group and is an investment management company that manages assets for third parties. With 382 billion of assets under management, it is one of the leaders in France and is one of the major investment management companies in Europe. With over 1700 employees, including 400 investment professionals, it operates from 8 principal centres of investment management throughout the world. The services it offers, which are innovative and high performing, have allowed it to develop a clientele of individuals, distributors, companies and institutions in France, Europe and Asia. 2- Response submission Crédit Agricole is pleased that the Commission recognises the major presence of the investment funds industry in European financial markets and welcomes the interest it has shown in the industry with this Green paper. 1

2 Current legislation has proved its worth, allowing the industry to develop while guaranteeing investors a very high level of security. Nonetheless, as the cycle of evolution of legislation at the European level is very slow, it seems judicious to start considering now whether this legal framework might possibly be improved. The objectives that could be pursued are diverse: - to provide a secure framework for investors and for market participants, - to ensure the development of the industry and privilege innovation, - to ensure all participants are treated equally, - to enforce competition law: between different savings products and between countries, whether EU members or not, - to enlarge the availability of products at the disposal of investors within the framework of a single European market. These improvements could follow two paths: on the one hand, by reinforcing uniformity among states regarding the interpretation and implementation of existing legislation and, on the other, by providing a mechanism for this legislation to evolve so that it is better able to adapt to market trends. 1) A common interpretation of the Directive across all states Uniformity of interpretations and harmonisation of the positions in different states are essential first steps towards the objective of building a genuine single market for investment funds. Without such uniformity, the conditions for healthy and normal competition among different product types or different countries will not be satisfied. There is a real risk of regulatory dumping to attract participants, and this poses a risk to investors. Conversely, the problem of over-regulation is that it would restrict creativity and the emergence of new and innovative participants. An initial test could be Europe-wide harmonisation of the simplified prospectus. In France, the only simple thing about this document is its name. If this prospectus is to be the main source of information for subscribers in a future single European market, it has to be identical across the whole of Europe. 2) An improvement in regulations Regulations must be able to adapt to new market developments, which means they need to be more flexible than at present. They must also be able to prevent the distortion of competition, either with other products, such as certificates or structured products, or with non-european competitors. This improvement should allow the industry to meet the new challenges it faces by further rationalising the sector and laying the groundwork for a coherent and consistent framework for all savings products. The lengthy nature of the European legislative process tends to favour the proposition that, in the future, European legislation on investment funds should follow the Lamfalussy procedure. The 2

3 broad lines would be those of a master Directive, while the implementing measures would be developed with the active participation of professionals and national regulators within the framework of Level 2 (ESC) and Level 3 (CESR) committees. Uniformity in the interpretation of these texts must be ensured by the CESR, although the CESR should not be allowed to seize matters on its sole initiative, in order to avoid complicated and lengthy texts and over-regulation. Within the framework of improving legislation, it is probably desirable to distinguish between short-term and longer-term objectives. a) Short-term objectives 1) To facilitate cross-border marketing The aim in this area is to make the European product passport effective. At the moment, the procedure envisaged by the Directive for notifying the host country too often resembles a second approval procedure. The time and expense of fulfilling these procedures are, without a doubt, excessive and not in conformity with the spirit of European regulation. In this area then, it would be better, without changing the regulations, to facilitate crossborder marketing of products by encouraging all of the different national regulators to adopt a single uniform interpretation of current texts. 2) To promote European master/feeder funds The European master/feeder fund structure is probably the best way to satisfy the Commission s concern that the investment management industry achieve economies of scale. The principle of master/feeder funds in itself considerably reduces the operational risk associated with two products and facilitates the control or supervision by the regulatory authorities of two different states. In the longer term, cross-border mergers should also be facilitated. In contrast, we are more reticent about pooling or cloning type structures which are much more opaque than master/feeder arrangements, create substantial operational risk as they are technically difficult to set up and raise a number of legal issues. 3) Upgrading competition law with other financial products The investment management industry is looking to develop in an increasingly competitive world. It must be able to do this without being burdened by stricter rules than for other types of products. 3

4 Competition law must be the same for listed products, including ETFs, which benefit from easier marketing and passport rules than UCITS. The same is true of life-insurance products, certificates, structured products and, more generally, all financial products or instruments other than UCITS ( substitute products ). This should not, in our view, be done through a tightening of the rules governing other products but rather through a harmonisation of marketing rules. The need for the harmonisation and simplification of competition law also concerns the tax treatment of savings products. In the perspective of improving the way competition works, it seems to us important that investment management companies be able to market the other non-ucits financial products that they are authorised to manage (CDOs for instance). 4) Create a Europe-wide definition for the notion of private placement for nonharmonised products For non-harmonised products, it is probably unnecessary to have specific European regulations in place immediately, even though this may become an issue in the future. At this stage, we think it would be sufficient to create a European definition for the notion of private placement. This would allow harmonisation of the currently widely-varying definitions in the different member states and facilitate the marketing of these products to institutional investors, companies and sophisticated clients. Such a definition would allow the harmonisation of private placement rules for these non-ucits products which are now an important asset class (regulated hedge funds, real estate funds, private equity funds, etc). 5) Clarifying the respective roles and responsibilities of investment management companies and distributors and, more broadly, all industry participants In the interests of investors, but also of industry participants, it seems to us important to clarify the respective roles and, therefore, the responsibilities of investment management companies and distributors. Today in France many of the distributor s responsibilities are assumed by the investment management company, even though the investment manager lacks the resources to discharge them. We would like to see a change at a national level, but it would also be judicious to address this matter at the European level. Such clarification is, in our view, all the more necessary as our industry is evolving towards an open architecture. Bank networks now offer the UCITS of investment management companies outside their group and, conversely, investment management companies seek to market their products through networks that are not their own. This clarification should, in our view, also address the roles of the two other participants in the profession, the promoters and the depositaries. 4

5 b) Medium-term and long-term objectives 1) Open architecture and the investment management company passport The move to open architecture is a market trend. At the moment, most investment management companies have distribution agreements with multiple distributors with whom they have no corporate ties. This trend is going to continue and, in all likelihood, expand. It is preferable for this to occur under conditions that are of benefit to consumers. Open architecture will only work once the regulations and interpretations of the various regulatory authorities have been harmonised. This can only be achieved through a long and thorough process. If not, it will only serve to destabilise the European industry to the advantage of non-european operators that benefit from a far more flexible regulatory framework. In this context, the investment management company passport will be indispensable. It will open up access to different markets whose operating rules will have been harmonised. It will allow major economies of scale without favouring states that use regulatory dumping, since rules will be effectively identical in all countries. In these circumstances, it will strengthen the European investment management industry by encouraging the emergence of strong players capable of accessing the entire market. 2) European passport for depositaries In this perspective of an effective single market, we see the European passport for depositaries as another key objective. It would make it possible to improve competition law and would form part of the mechanism of an open architecture. Nonetheless, it seems to us that, as with the investment management company passport, the conditions are not yet in place for such a depositary passport. Initially, it would be desirable to define clearly, at the European level, the functions of UCITS depositaries and to develop a single vision of what the role and responsibilities of a European depositary should be. Finally, we feel that it is not unreasonable to view the investment funds industry, especially in Europe, as being fed currently, and increasingly so, by savings destined to prepare the retirements of Europe's aging population. Differences in tax treatment, labour laws and the regulatory environment surrounding investment vehicles are hindering the development of a trans- european framework which we feel is needed in order to facilitate the industry's vital role in this trend. As far as investment supports for Employee Share Schemes are concerned, French law authorises, by way of an exception to the normal rules of prudence, the investment by UCITS up to 100% in the shares of a single company. These UCITS are the vehicles which collect the 5

6 shares purchased by the employees subsequent to the very specific operations mounted by their employers. These structures allow issuers and subscribers alike to optimise the administration of the fund and to mutualise the associated costs, resulting in a decrease in the costs and the investment supports for employee share schemes with capital garanties and/ or leverage. In order to be able to provide an efficient offering to the employee shareholder we feel that it would be useful that these investment vehicles benefit from mutual recognition in accordance with the Directive 85/611/CE co-ordinating the various legislative, regulatory and administrative texts. Similarly, we would like to see the creation of an offering of pension fund management within a European Employee Savings Plan (for example, in the case of a company adopting the status of a European Company) which, no matter which country it originates from, would have the benefit of a single tax treatment and the freedom to constitute the savings and to exit by way of regular annuities or a capital payment. Setting up such schemes would encourage competition amongst the various offerings coming from Financial Institutions and Insurance Companies from each country to the benefit of the employees who have subscribed. 6