In this ECMI Policy Brief, Karel Lannoo observes that Brexit will have a big impact on the asset management industry for three reasons: 1) the passport will disappear for UK-licensed companies, which will stop or certainly seriously hinder the trend of concentration towards the UK; 2) the equivalence regime, which serves as the basis for third-country access to the EU, is unevenly developed across the different segments of asset management; and 3) the value chains in asset management will be affected, with implications for supporting firms or infrastructures.
Against this prospective scenario, Lannoo first reviews recent trends in the asset management industry and offers an overview of the UK asset management industry from a European perspective. He then discusses the applicable EU rules, the equivalence regime and the impact of Brexit.
Given the special status of the UK as a financial centre, the paper concludes that it would be advisable to have a more comprehensive equivalence agreement, covering all the different regulations and directives, rather than taking the current third-country regime as the base. This should be part of a bilateral procedure between the UK and the European Commission. As it looks now, Lannoo anticipates that Brexit will be fairly abrupt, leaving asset managers limited time in which to adapt their value chains, which will be disruptive for the entire European industry.
Karel Lannoo is Chief Executive of CEPS.