Integrated EU supervision proposed for large asset managers

Europe's asset management industry has nearly doubled its assets under management to over €20 trillion in the past decade, growing three times faster than the banking sector.

This pan-European industry is highly concentrated, with 10 to 15 key players dominating and operating extensively across borders.

Despite their systemic relevance, these largest asset managers remain supervised solely at the national level.

This fragmented oversight creates supervisory blind spots, as risks can materialise far from a fund's home jurisdiction and beyond the effective reach of its national supervisor.

The market turmoil of March 2020 starkly reminded how common shocks can trigger and amplify stress across funds and national borders, highlighting the limitations of the current framework.

Indicators like size, concentration, cross-border activity, and interconnectedness highlight the systemic relevance of a small number of asset management groups.

The largest 10 to 15 groups dominate the European landscape, managing around €6.3 trillion in assets, over half of total euro area funds.

These groups are often closely connected to banks or insurance companies, creating potential reputational spillovers and funding links to the banking sector.

The European System of Central Banks (ESCB) sees merit in a more integrated supervision of these systemic asset managers.

A feasible approach involves tasking the European Securities and Markets Authority (ESMA) with coordinating supervisory colleges for these entities, bringing together relevant national supervisors to promote a European approach.

This targeted focus covers the systemic core.