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EU regulations cost UK asset managers US$3b a year: report

European Union flags flutter outside the EU Commission headquarters in Brussels.

[LONDON] Complying with European Union regulations costs British asset managers 2 billion pounds (S$4.28 billion) a year and the EU should find ways to cut managers' costs when they sell their funds across the bloc, a report said on Monday.

EU regulations allow fund managers to sell their products across national borders, which is positive for both the asset managers and investors, the report from think-tank Open Europe and fund management trade body New City Initiative said.

But it said the start-up and running costs of the so-called "passport" system were a deterrent for some fund managers. "The EU should ensure that European asset managers are not bogged down by disproportionate EU regulation and can take full advantage of the single market without facing extra costs when distributing their funds across the 28 EU member states," the report said.

The report estimated that a UK-based fund manager marketing and distributing in all the other 27 EU member states plus Switzerland would face total initial costs of over 1.5 million euros (S$2.23 million).

On-going costs could approach 1.4 million euros a year, it added.

The report recommended removing these "national hurdles" to the marketing of funds across Europe, for instance by cutting the requirement to appoint local paying agents in member states or to translate investor documents into local languages.

It also opposed EU proposals to ban fund managers from receiving brokers' investment research as part of the dealing commissions they pay, which are then charged to the funds'clients. "An outright ban would have a disproportionate impact on smaller asset managers - and may even force some of them out of business."