EU mutual funds appear set for management passport
By Huw Jones
BRUSSELS, Nov 21 (Reuters) - Britain, Germany and France look set to win their battle to allow mutual funds to manage European operations from their home base and save money, a move that will dismay Luxembourg and Ireland.
EU Internal Market Commissioner Charlie McCreevy has proposed a sweeping reform of how pan-EU mutual funds can operate in a bid to make the sector more efficient and give investors a wider choice of lower-cost funds.
The so-called undertakings for collective investment in transferable securities (UCITS) draft law updates EU rules overseeing cross-border mutual funds sold across the 27-nation bloc.
It would allow funds in the 6 trillion euro ($7.5 trillion) retail sector to merge and pool resources more easily and list quickly.
McCreevy proposed his reform to the European Parliament and EU states for adoption but, faced with opposition from Ireland and Luxembourg, left out a widely anticipated core element -- a so-called management company passport.
A passport would allow a fund in one country to manage the funds it has dotted across Europe without having to open offices in each of those countries.
Ireland and Luxembourg are major centres for listing funds and home to companies that provide back office services.
The two countries said managing those funds from elsewhere would fragment supervision but critics argue the two simply fear losing business to London, Frankfurt and Paris where many large, cross-border funds have their base.
Ireland and Luxembourg appear to have lost their battle after representatives of most EU states agreed on Wednesday evening to insert a full management company passport into the draft law.
A "large majority of delegations" backed such a proposal from EU president France, a paper endorsed at Wednesday's meeting said.
Luxembourg, Ireland, Slovakia and Poland expressed formal "reservations" about a passport but were unable to muster enough votes to bloc it.
EU finance ministers are due to endorse the move on Dec. 2, allowing a joint deal with parliament early next year.
Also on Dec. 2, parliament's economic and monetary affairs committee is expected to vote in favour of inserting a provision for a full management company passport into the draft law.
"I think we are going to get a majority to support this," a parliament source said.
National regulators in the EU have recommended that if there is a management passport, there should still be a local office for funds from elsewhere in the bloc.
Parliament is expected to meet these recommendations by adopting alternatives that do away with the need for a local office, the parliament source said. (Editing by Andrew Macdonald)
