EU body should oversee Europe's biggest asset managers, ECB blog

Call for Integrated Supervision of Asset Managers

FRANKFURT, Feb 13 (Reuters) - The European Union's financial watchdog should coordinate oversight of the bloc's biggest asset managers, such as BlackRock and Amundi, to eliminate potential "blind spots" in national supervision, European Central Bank economists said on Friday.

The call, made in a blog post, is part of a broader push by the ECB to foster more integrated European capital markets that can finance economic growth in the EU and help it compete with the United States and China. 

Under the proposal, the European Securities and Markets Authority (ESMA) would be tasked with coordinating colleges of national supervisors overseeing the 10 or 15 largest asset managers, which manage 6.3 trillion euros ($7.48 trillion). 

Current Oversight Challenges

"A more European supervisory framework would ultimately strengthen the sector’s resilience, helping to preserve credit and liquidity flows to the economy during periods of financial stress," said the blog, which the ECB says does not necessarily reflect its official view. 

Impact on Financial Stability

Such supervisory colleges already exist for some asset managers to exchange information and practices on a voluntary basis. Created after the global financial crisis, ESMA has so far mostly supervised clearing houses and ratings agencies, and acted as a standard setter.

While the ECB has long pushed for EU‑wide oversight of funds, it has repeatedly run up against resistance from national authorities reluctant to cede control over sensitive markets such as government bonds and shares in companies seen as national champions. 

BLIND SPOTS

The ECB blog said the size of this industry, its links to the banking sector and its concentration in just two jurisdictions -- finance-friendly Luxembourg and Ireland -- meant national supervisors risked missing potential big risks and spillovers.

"Nationally fragmented oversight leaves room for supervisory blind spots that could be addressed through integrated supervision," the blog's authors, including ECB experts Ana Maria Ceh and Pierce Daly, said.

European funds' assets almost doubled over the past decade to more than 20 trillion euros ($23.76 trillion), as they moved into business that banks abandoned due to tighter regulation in the wake of the global financial crisis. 

Cross-Border Operations of Asset Managers

Big European asset managers operate extensively across borders, making their exposure harder to track for national watchdogs, the ECB said in its blog.

And they have close ties to the banking sector, whether through lending to it or because they are owned by a bank such as Credit Agricole's Amundi, Deutsche Bank's DWS or BNP Paribas Asset Management.

A separate ECB study published this week found that asset managers fund about 15% of traditional lenders' balance sheets in the euro area and account for about 10% of total bank assets.

($1 = 0.8418 euros)

(Reporting by Francesco Canepa, Editing by Philippa Fletcher)