Shedding Light on Non-Financial Risks – a European Survey

Shedding Light on Non-Financial Risks – a European Survey — January 2012

3. The Need for Change in Regulation and Risk Management Practices

regarding depositaries and compliance checks, asset managers should have the most exacting constraints. However, for now depositaries have the largest role in the European model. Asset managers “are responsible for valuation; for the choice of assets and due diligence; for compliance with quantitative restrictions; and for providing legal information, annual reports and key information documents to unit-holders. Broadly, investment firms have great responsibilities in the management of non-financial risks: they choose the geographies and jurisdictions they invest in, they are responsible for liquidity and collateral risk management — depositaries also inherit responsibilities for collateral management because assets must be transferred within an appropriate time frame and because of their responsibility for the pricing of contracts” (Amenc and Sender, 2010b, p. 72).

is also typical of the French culture as French depositaries had the greatest responsibility within European countries. In this section we consider fiduciary duties, control and obligation of means of depositaries, obligations of restitution and depositary liabilities are considered in section 3.5. •  Finally, in order to avoid adverse selection, it is in theory necessary that retail insurance as well as capital requirement be risk-based. As these options, although not necessarily incompatible, correspond to different prioritisations, it is necessary to investigate the opinions of the industry. The industry wishes for stronger responsibilities of asset managers and clearer responsibility for depositaries The main conclusion is that respondents primarily believe that more responsibility should be given to asset managers. After all, as they take most decisions

Overall, 67% agree that asset managers should have greater responsibility

Figure 3.3.1: How much do you agree with the following assertions regarding regulations on capital protection anf financial resposability for non-financial risks?

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An EDHEC-Risk Institute Publication