Response to discussion on a new prudential regime for investment firms
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Amundi is very much concerned with issues of financial stability and has continuously supported initiatives that enhance it in a material way. Despite its shortcomings, we believe that EMIR is quite positive to reinforce and better supervise derivative markets. We also consider that the specific risks that stem from CNAV MMFs are largely addressed and tackled with the coming MMFR. We see the Benchmarks regulation as a milestone on curbing risk and establishing responsibilities for administrators and we expect regulators to now consider data providers after CRAs and benchmark administrators as potentially systemic actors. Conversely, we are not satisfied with the approach taken on SFTR which does not consider asset managers as they should: they do not use SFTs to gain or provide leverage and increase risk but, to the contrary, to enhance safety and return for investors through collateralized transactions that reduce counterparty risk and procure extra lending gains.
Asset management is too often taken for shadow banking and some regulators have a definite tendency to evaluate risk with the same measurement they apply for other types of businesses. Asset managers do not carry risk on their balance sheet, they act as an agent for the client investors who entrust them with their money. They are paid a fee by investors who take all the market risks, including credit, counterparty and liquidity risks. Asset managers have to manage these risks and to master operational risk thanks to an appropriate organization and adequate human and technical means. Asset management is very strictly regulated and tightly supervised at all levels: actors, products and relationships with clients. Amundi has participated to works conducted at the level of FSB as well as IOSCO on the potential systemic risk of asset managers and asset management and on their apparent vulnerability with regards to leverage and liquidity. We regularly contribute to consultations launched by legislators and regulators, at national, regional and international levels. We have a strong view that potential risk of a systemic magnitude does not exist in our industry and that locally limited risks can be properly addressed. We have an even stronger opinion that rules that are efficient for other industries such as banking or insurance are not relevant for asset management. We developed this opinion when answering to EBA’s consultation on stepping in risk for example. However Amundi considers that banking like activities have to be regulated as if carried by banks even if made by asset managers. In other words it is a question of level playing field as well as financial stability to have the same prudential framework apply to different entities when they conduct the same business. For example when an asset manager offers guarantees or underwrites, acts as a lending agent, extends credit lines, invests in assets as principal (even if it is to provide seed money to funds), trades on own account or as market maker, is the sponsor of a securitization and keeps a minimum retention percentage… it should, in all these circumstances, be subject to the same prudential rules as a bank and put own capital accordingly. We also believe that operational risk does exist at the level of the firm and should be addressed and calibrated in a different way as for banks as the nature and substance are different.
Amundi has also to mention in this introduction its surprise to see EBA working on asset managers even if they are caught under MIF for ancillary activities only. There is a clear indication in the European structure that asset managers are under the direct supervision of ESMA and national competent authorities for securities markets. We do appreciate efforts by EBA to foresee a new prudential regime for investment firms but believe that ESMA has more familiarity with asset management industry, with topical UCITS and AIFM directives and is better positioned to build an efficient and appropriate framework for asset managers, be they investment firms or not.
If we were to summarize Amundi’s position in this DP we would list the following points:
• A specific prudential regime for IF should rely on effective risk;
• Calibration will be of prime importance to agree on the architecture of the new regime;
• One size fits all is not appropriate ; this has 2 consequences
• First, differentiate according to the business model: agency or balance sheet business;
• Second, split in 3 classes: systemic bank-like actors subject to CRR/ CRD, specific regime for standard IF, simplified and different regime for smaller entities;
• For class 3, smallness should be assessed in terms of level of effective risk;
• Pure asset managers will in their vast majority belong to class 3;
• Class 3 regime should be based on a “FOR plus” approach;
• CRR/CRD should apply to all bank-like activities, only way to grant a fair competition;
• Asset managers (AM) have only operational risk, market risks being borne by investors;
• Size is not a good proxy for AM’s operational risk, which is largely mitigated;
• AMs and other IFs part of a banking group are subject to CRR like class 1 entities and should not suffer duplicative requirements that would penalize them;
• Leverage of the firm measured as a net exposure is a factor of additional risk justifying a lift up factor for non bank-like activities;
• Market participants do expect regulators to set up a central data base for reporting.
X x X
Amundi agrees that an investment firm that meets criteria to qualify as a OSII or a GSII should be identified as such and made compliant with banking prudential regime if it conducts bank-like activities. We do not think that any asset manager will meet the criteria as their bank-like activities are limited (and in our opinion those activities should be regulated as if conducted by banks) and their potentiality for any systemic impact is theoretical in consideration of their agency business model.
Our view for a good prudential regime would be to follow a clear process of risk mapping and assessment:
• Identify the business model : agent or principal;
• If an agent, consider operational risk only since there is no market risk and evaluate processes to mitigate and reduce it;
• If a principal, assess the existence of clients’ money or assets and introduce proportionality in relationship with segregation and bankruptcy remoteness according to the local legal environment;
• If principal, consider market, counterparty and liquidity risks and the procedures to manage and mitigate them; add the operational risk and its mitigants; refer to CRR for bank-like activities;
• Consider proportionality in terms of business model, complexity and diversity of products and clients but not size as far as asset management is concerned.
We believe that small must designate those firms that present a small level of risk when mapping and assessing it. Typically most “pure” asset managers will be small firms and should integrate category 3 since they have small balance sheets and only a small level of operational risk. For this category capital requirement should be based on an overheads “plus” approach. Not surprisingly this is the approach followed under UCITS and AIFM directives.
We strongly oppose the fact that using a MIFID passport or using tied agents would preclude an investment firm from belonging to category 3. We do not see any link between these 2 characteristics and the level of risk. If, thanks to a passport, addressing clients in different Member states were to represent a risk per se, the whole purpose of the European Union should be reconsidered.
• Risk to consumers is not consistent a category as it mixes operational risk and counterparty or credit risk for the client. K-factors (c) ASA, (d) CMH or (e) LTC typically reflect the credit risk taken by the client when trusting an IF to safeguard and hold assets, cash or contracts for his benefit. Conversely the other 3 factors are related to operational risk in the execution of portfolio management or orders and the delivery of advice. We shall develop below why we totally oppose the idea that AuM or AuA are relevant as a proxy for this operational risk.
• Risk to market is also split in the analysis between market risk on the proprietary trading activity of a firm and operational risk in the case of handling orders transmitted by indirect clients (a new category identified in §40 which ought to be singled out as a (h) factor, Order Handling).
• Risk to the firm aims at capturing the market, credit and counterparty risks present on the balance sheet and off balance sheet which are not captured otherwise. As discussed in the DP any loss resulting from these risks are to be suffered by the shareholders and should not legitimate any additional capital requirement. The rationale for nevertheless maintaining a requirement lies in the conviction of EBA that when a firm is in poor shape it tends to depart from its usual procedures and to take higher risk with less controls. It is not convincing as it lies on an a-priori of misconduct that would not be spotted by supervisors. In other words it implies that supervisors would be negligent and ignore alerts of a deteriorating situation.
We are convinced that taking the business model as the starting point EBA could build a far more resilient framework to determine risks and then choose appropriate risk factors leading to better K-factors. The distinction between agency and own account is fundamental. When working on an agency basis, an investment firm does not incur market, credit or counterparty risks. Its only risk is operational and it does not matter that it may hurt clients, market participants or the firm itself. Conversely, when acting on own account, the total of risk to the firm, to customers and to the market has to be taken into account. However the type of arrangements that have been taken with clients may largely mitigate some risks: for example segregation of assets and insurance mechanism are key factors of protection for clients and reduction of risk.
Yes, we agree that an asset manager who acts as sponsor of a securitization and retains part of the risk as foreseen in §44 should present an adequate level of capital to support this activity. It is a risk factor that we understand and we urge regulators to align the capital requirement for that sort of bank-like activity to what is expected from banks, whatever the type and nature of the entity carrying the business. The same should apply in our view for all bank-like activities including the management of the own portfolio of an asset manager, not only the trading portfolio but also the necessary seed money.
We strongly oppose the idea that size is a proxy for risk. It is the predicament of the use of AuM as a K-factor and we do not share it. Firstly, asset managers are tightly supervised, produce heavy reporting; they must comply with strict regulations on their products, like UCITS, and their organization as a firm (AIFMD); they have fiduciary duties to their client investors who monitor them and their performance very closely. The sanction for an asset manager is the redemption that clients may decide at any time without any justification. As a result of all these converging elements asset managers have built strong risk management processes and developed a real expertise on risk control. Secondly, the larger companies who have larger AuM have often been leading the market, since they are able to invest more and more rapidly. In that respect size is a proxy for quality. It is a fact that only smaller firms have defaulted in the asset management industry. Larger firms have been able to face heavy redemptions without difficulties. The example of Pimco over the last years is very illustrative in that respect. Thirdly, the size of assets under management is dependent on the capacity of an asset manager to address different investor types and offer efficient investment solutions to a variety of target markets. Those clients have various objectives, delegate a large or a small part of their assets, split their delegations to many or a few managers, they face different liabilities with different time horizons under different regulations and with different risk appetite and governance…in one word, size is a proxy for diversity and a factor of risk-mitigation. Fourthly, many of these investors are regulated entities which have to report their exposures monitor their risk and meet own capital requirements. In these instances, risk is addressed at the level of the investor and regulators should avoid to duplicate requirements. If considered to assess risk AuM should in any case be deflated from the mandates and subscriptions of prudentially regulated investors. AuM ex assets of regulated entities would be more appropriate.
We, nevertheless, share the view that an uplift factor linked to the leverage of a firm is an appropriate way to put some “skin in the game” with an extra capital buffer. We insist that the measure of leverage in this case should be consistent with the net exposure approach already developed under UCITS directive. We benefit from a long experience and many clarifications have been made public by regulators on the way to assess this leverage through net exposure.
Amundi recommends that the discussion about the comparison between FOR and Initial Capital Requirement (ICR) be disregarded. FOR and ICR are not comparable and do not share the same objective. As its naming clarifies ICR is determined as the minimum capital at the beginning of business, it very much relies on estimates of the development of the business over the first years of the Investment Firm. One may expect regulators to take as reference the cash needed to face initial investments and current costs of the firm over several years, i.e. till the business becomes profitable. It is in no way comparable to the FOR which requires 3 month of expenses to be available to unwind the business if needed. We note that FOR estimate does not imply that the company will close in 3 month but that the cost of closure might create a gap of money that roughly amounts to 3 month expenses. There is no rationale in suggesting that FOR should be at all times higher than ICR.
We urge EBA not to take any position on the NBNISIFIs and a fortiori not to judge of the appropriateness or calibration of K-factors to entities whose qualification as systemic is far from being determined.
As an asset manager, we think that ESMA is best positioned to proceed with the necessary exercise of mapping risks, deciding netting and filters, and then calibrating regulatory capital requirements in our industry. Conversely, for bank-like activities we do favour the total alignment of requirements for banks and non-bank entities.
As a member of a banking group, Amundi would like a clarification to be made on the absence of duplication of requirements. Since we are already prudentially regulated, whatever the conclusions and calibrations of a new IF prudential regime we should not be impacted. We nevertheless fear that regulators may add up requirement in an unbearable manner and would like clearance on this point.
Consequently, Amundi cannot express views on a topic, liquidity, that does not concern asset managers at all. We strongly advocate for a carve out for asset managers in that respect and totally oppose the “one size fits all” approach that EBA is considering.
• In §138, the DP underlines the vulnerability of firms acting on an agency basis who may not figure out the concentration of risks they have. This statement sounds as pure speculative thinking without any foundation in our ears. Asset managers have stringent obligations of dispersion when investing and using counterparties. There is clear evidence in our profession that concentration risk is continuously monitored and breaches are effectively sanctioned. Furthermore reporting is manifold and very detailed. For other IFs acting as agent, we believe that large exposures are difficult to build when there is not much on the balance sheet.
• By hypothesis, class 3 firms are small in terms of risk and interconnection. There is consequently no need to impose on them an unnecessary burden of reporting.
Our main concern is to avoid duplication of rules and requirements. Being subject to CRR should exonerate Amundi from any other prudential regulation. The IF new regime might be used as a source for proper ways to analyse specific risks and enhance the relevance of some pillar 2 approaches, but it should not impact calculation of capital requirements. We could not face the introduction of a supplementary capital buffer on top of what CRR requires. Alternatively, Amundi could be exempted from those requirements which are equivalent to specific provisions under sectorial asset management regulations : we ask for consistency and absence of duplication. Regulators should keep in mind that asset management is a highly competitive industry and that apparently small differences in regulation can have dramatic consequences and overly penalize some actors when compared to their direct competitors.
Let us take some illustrations:
• Dual reporting under EMIR seems to only result in a huge number of false signals whereby a reporting is rejected because it does not match with the equivalent reporting from the counterparty; in many instances the mismatch is either on a non-significant field or totally formal. It is rather distressing that the terrible experience on EMIR did not appear sufficient for legislators to avoid repeating the requirement for dual reporting under SFTR. The funny part of it is that the regulation foresees an assessment of the efficiency and the interest of the dual reporting before the review of SFTR. A test of the efficiency of the single sided reporting before requiring dual only if necessary would have made more sense.
• EMIR reporting is a good example where actors get the feeling that regulators receive too many data and are not able to process them and draw conclusions. Probably the inclusion of exchange traded derivatives in the reporting obligation has increased the flow of information (when the data of CCPs was easily accessible to get information without imposing too much on all actors).
• Data required under MIFID is another example of excessive reporting for a limited usage. Reporting the name of the trader and the decision maker of a trade on the investor’s side is supposed to help when investigating on a suspicion of market abuse. In other words it is useless information in 99.9% of the cases. It would have been more efficient to improve the former investigation right of the NCAs through the chain of transmission of the suspected order.
• Solvency 2 has brought to light another issue with reporting, the intellectual property right and the need to pay a license to Credit Rating Agencies to provide insurance clients with the rating of their investments and be able to populate their regulatory report.
• The same fields are required to be reported in different manners under different regulations. It is not difficult when standardization and uniqueness are ensured, like for LEI, but there are other data where standardization is not achieved.
• Time stamp under MIFIR will be adjusted at the microsecond in many instances and included in the reporting. It is an extra burden to ensure accuracy at that level and when knowing that the aim is to track high frequency trading (HFT), we feel the collateral cost involved as totally disproportionate. In order to put some substance in HFT and have it participate to the price formation mechanism instead of interposing for a micro second, regulators have other means that are both costless and totally efficient: increase the tick size, forbid subsidized transaction costs for HFT, impose latency of a couple of seconds before withdrawing an order…
We are impatient to see European authorities develop a central data basis where actors would deposit data on all items that are necessary for servicing all reporting requirements. This hub would be accessible to authorities according to their needs and rights. A unified and unique data base would need some time to be implemented, but the IT developers would certainly be motivated to act promptly if there were an engagement that the channel for regulatory reporting would be unique and harmonized.
We have a strong view that recovery and resolution planning is appropriate for very large entities only where ordinary liquidation would impact not only clients but markets globally. It is true for most financial infrastructures and some may be IFs. It is not the case with most IFs acting as agent who have balanced positions for their clients and do not hold own account positions. We believe that sectorial regulations have covered most of the areas of concern but do not oppose the fact that a clean-up clause be added in the IF regime that would only apply in the absence of specific sectorial provision.
For public disclosure on prudential information, we think that it is for regulators to decide. They have to weigh, on the one hand, whether or not there is a risk of panic in disclosing information that might be distorted by medias and misinterpreted by non-professional market participants and, on the other hand, whether public interest requires transparency. We believe that only in very exceptional cases public disclosure would be appropriate.
For other IFs which are not “sectorially” regulated on remuneration, we think that proper attention should be paid to the activities and risks before defining a rule. In many instances, we believe that one or several of their activities impose remuneration rules for some employees; it is the case with sales persons under MIFID. The proper route is in our opinion to start from this existing regulation and expand its scope and/or amend its provisions if necessary and not to try and impose another framework like CRD/CRR designed for banks.
No, we do not agree with the principle of this question which intends to expand the scope of CRD/CRR to many other firms, even with proportionality. The issue has been discussed several times in the DP on specific points. The answer is that “one size fits all is not the solution”. Regulators should start from the proper analysis of risks of IFs and in priority make a distinction according to their business model: agency or own account.
Question 1: What are your views on the application of the same criteria, as provided for G-SIIs and O-SIIs, for the identification of ‘systemic and bank-like’ investment firms? What are your views on both qualitative and quantitative indicators or thresholds for ‘bank-like’ activities, being underwriting on a firm commitment basis and proprietary trading at a very large scale? What aspects in the identification of ‘systemic and bank-like’ investment firms could be improved?
Amundi is the leading asset manager in Europe and is estimated to rank at the 8th position worldwide after its planned acquisition of Pioneer. Current Assets under Management of 1050 billion € will grow to close to 1300 billion € following this move. A listed company since November 2015, Amundi is prudentially consolidated in Credit Agricole group, its majority shareholder and a G-SIFI. Furthermore, Amundi holding company is a licensed Etablissement de crédit and several subsidiaries within the group are also licensed as an investment firm or a bank. As a consequence, Amundi is not totally immune from prudential regulation despite the fact that its main activity is to act as an agent in the asset management industry.Amundi is very much concerned with issues of financial stability and has continuously supported initiatives that enhance it in a material way. Despite its shortcomings, we believe that EMIR is quite positive to reinforce and better supervise derivative markets. We also consider that the specific risks that stem from CNAV MMFs are largely addressed and tackled with the coming MMFR. We see the Benchmarks regulation as a milestone on curbing risk and establishing responsibilities for administrators and we expect regulators to now consider data providers after CRAs and benchmark administrators as potentially systemic actors. Conversely, we are not satisfied with the approach taken on SFTR which does not consider asset managers as they should: they do not use SFTs to gain or provide leverage and increase risk but, to the contrary, to enhance safety and return for investors through collateralized transactions that reduce counterparty risk and procure extra lending gains.
Asset management is too often taken for shadow banking and some regulators have a definite tendency to evaluate risk with the same measurement they apply for other types of businesses. Asset managers do not carry risk on their balance sheet, they act as an agent for the client investors who entrust them with their money. They are paid a fee by investors who take all the market risks, including credit, counterparty and liquidity risks. Asset managers have to manage these risks and to master operational risk thanks to an appropriate organization and adequate human and technical means. Asset management is very strictly regulated and tightly supervised at all levels: actors, products and relationships with clients. Amundi has participated to works conducted at the level of FSB as well as IOSCO on the potential systemic risk of asset managers and asset management and on their apparent vulnerability with regards to leverage and liquidity. We regularly contribute to consultations launched by legislators and regulators, at national, regional and international levels. We have a strong view that potential risk of a systemic magnitude does not exist in our industry and that locally limited risks can be properly addressed. We have an even stronger opinion that rules that are efficient for other industries such as banking or insurance are not relevant for asset management. We developed this opinion when answering to EBA’s consultation on stepping in risk for example. However Amundi considers that banking like activities have to be regulated as if carried by banks even if made by asset managers. In other words it is a question of level playing field as well as financial stability to have the same prudential framework apply to different entities when they conduct the same business. For example when an asset manager offers guarantees or underwrites, acts as a lending agent, extends credit lines, invests in assets as principal (even if it is to provide seed money to funds), trades on own account or as market maker, is the sponsor of a securitization and keeps a minimum retention percentage… it should, in all these circumstances, be subject to the same prudential rules as a bank and put own capital accordingly. We also believe that operational risk does exist at the level of the firm and should be addressed and calibrated in a different way as for banks as the nature and substance are different.
Amundi has also to mention in this introduction its surprise to see EBA working on asset managers even if they are caught under MIF for ancillary activities only. There is a clear indication in the European structure that asset managers are under the direct supervision of ESMA and national competent authorities for securities markets. We do appreciate efforts by EBA to foresee a new prudential regime for investment firms but believe that ESMA has more familiarity with asset management industry, with topical UCITS and AIFM directives and is better positioned to build an efficient and appropriate framework for asset managers, be they investment firms or not.
If we were to summarize Amundi’s position in this DP we would list the following points:
• A specific prudential regime for IF should rely on effective risk;
• Calibration will be of prime importance to agree on the architecture of the new regime;
• One size fits all is not appropriate ; this has 2 consequences
• First, differentiate according to the business model: agency or balance sheet business;
• Second, split in 3 classes: systemic bank-like actors subject to CRR/ CRD, specific regime for standard IF, simplified and different regime for smaller entities;
• For class 3, smallness should be assessed in terms of level of effective risk;
• Pure asset managers will in their vast majority belong to class 3;
• Class 3 regime should be based on a “FOR plus” approach;
• CRR/CRD should apply to all bank-like activities, only way to grant a fair competition;
• Asset managers (AM) have only operational risk, market risks being borne by investors;
• Size is not a good proxy for AM’s operational risk, which is largely mitigated;
• AMs and other IFs part of a banking group are subject to CRR like class 1 entities and should not suffer duplicative requirements that would penalize them;
• Leverage of the firm measured as a net exposure is a factor of additional risk justifying a lift up factor for non bank-like activities;
• Market participants do expect regulators to set up a central data base for reporting.
X x X
Amundi agrees that an investment firm that meets criteria to qualify as a OSII or a GSII should be identified as such and made compliant with banking prudential regime if it conducts bank-like activities. We do not think that any asset manager will meet the criteria as their bank-like activities are limited (and in our opinion those activities should be regulated as if conducted by banks) and their potentiality for any systemic impact is theoretical in consideration of their agency business model.
Question 2: What are your views on the principles for the proposed prudential regime for investment firms?
Amundi agrees with the identification of 3 different classes of investment firms as it allows for proportionality in the approach. Our first comment relates to category 1. We consider that asset managers firms that belong to a prudentially regulated group (bank or insurance) should not be penalized in their competition with independent firms. The same activity should imply the same treatment and level playing field is a must. With regard to class 2 entities, we believe that regulators should first establish a clear distinction among investment firms according to their business model. We do not agree that the same principles should apply universally to all firms and would prefer less harmonisation and more specificity and proportionality in the approach. The key is to analyse whether the firm acts as agent or principal. Once this point is clarified it is possible to build a consistent framework and to introduce proportionality. If not clarified, the supposedly unique regime will suffer lack of relevance, misconceptions or inconsistencies when applying to firms so different as asset managers, consumer loans providers or broker-dealers. Furthermore we think that since the DP focuses on capital requirement as the ultimate solution to mitigate risk, it should concentrate on the assessment of the effective level of risk of each entity.Our view for a good prudential regime would be to follow a clear process of risk mapping and assessment:
• Identify the business model : agent or principal;
• If an agent, consider operational risk only since there is no market risk and evaluate processes to mitigate and reduce it;
• If a principal, assess the existence of clients’ money or assets and introduce proportionality in relationship with segregation and bankruptcy remoteness according to the local legal environment;
• If principal, consider market, counterparty and liquidity risks and the procedures to manage and mitigate them; add the operational risk and its mitigants; refer to CRR for bank-like activities;
• Consider proportionality in terms of business model, complexity and diversity of products and clients but not size as far as asset management is concerned.
Question 3: What are your views on the identification and prudential treatment of very small and non-interconnected investment firms (‘Class 3’)? If, for example, such class was subject to fixed overheads requirements only, what advantages and drawbacks would have introducing such a Class 3? Conversely, what advantages and drawbacks could merging Class 3 with other investment firms under one single prudential regime with ‘built-in’ proportionality have?
Amundi favours the introduction of a special regime for non-interconnected smaller firms. We believe that the complexity of the foreseen regime is not adequate for smaller firms and that a simplified basic approach with not many parameters is the only way to have a fair regulation. Proportionality in the application of a more complex system will remain complex not to say even more complex if some exemptions are to apply only if their impact is limited when compared with the standard approach. We are very concerned that EBA in the final part 4.6 of the DP considers alternatives that are terrifying for smaller entities in that respect.We believe that small must designate those firms that present a small level of risk when mapping and assessing it. Typically most “pure” asset managers will be small firms and should integrate category 3 since they have small balance sheets and only a small level of operational risk. For this category capital requirement should be based on an overheads “plus” approach. Not surprisingly this is the approach followed under UCITS and AIFM directives.
Question 4: What are your views on the criteria discussed above for identifying ‘Class 3’ investment firms?
From the long list of exclusions in question 4 we get the confirmation that EBA should have drawn from the start a clear-cut distinction between firms according to their business model. Once done, a proper assessment of real risk can take place and the notion of smallness evidently applies to the level of risk. Once again, we believe that most asset managers acting in the single capacity of agent will present a sufficiently low level of risk to belong to category 3. We further consider that overheads requirement plus a buffer based on a simple standard appraisal of operational risk will be sufficient to determine an adequate level of own capital for them.We strongly oppose the fact that using a MIFID passport or using tied agents would preclude an investment firm from belonging to category 3. We do not see any link between these 2 characteristics and the level of risk. If, thanks to a passport, addressing clients in different Member states were to represent a risk per se, the whole purpose of the European Union should be reconsidered.
Question 5: Do you have any comments on the approach focusing on risk to customers (RtC), risk to markets (RtM) and risk to firm (RtF)?
Amundi agrees that when determining a capital requirement for investment firms the focus should be placed on risk and in that respect we support the suggestion in §33 that K-factors should be significant and linked to those indicators that the firms use in their own monitoring and dashboard. However, we do not agree that the envisioned criteria are good indicators of the effective level of risk and we cannot support the proposed classification.• Risk to consumers is not consistent a category as it mixes operational risk and counterparty or credit risk for the client. K-factors (c) ASA, (d) CMH or (e) LTC typically reflect the credit risk taken by the client when trusting an IF to safeguard and hold assets, cash or contracts for his benefit. Conversely the other 3 factors are related to operational risk in the execution of portfolio management or orders and the delivery of advice. We shall develop below why we totally oppose the idea that AuM or AuA are relevant as a proxy for this operational risk.
• Risk to market is also split in the analysis between market risk on the proprietary trading activity of a firm and operational risk in the case of handling orders transmitted by indirect clients (a new category identified in §40 which ought to be singled out as a (h) factor, Order Handling).
• Risk to the firm aims at capturing the market, credit and counterparty risks present on the balance sheet and off balance sheet which are not captured otherwise. As discussed in the DP any loss resulting from these risks are to be suffered by the shareholders and should not legitimate any additional capital requirement. The rationale for nevertheless maintaining a requirement lies in the conviction of EBA that when a firm is in poor shape it tends to depart from its usual procedures and to take higher risk with less controls. It is not convincing as it lies on an a-priori of misconduct that would not be spotted by supervisors. In other words it implies that supervisors would be negligent and ignore alerts of a deteriorating situation.
We are convinced that taking the business model as the starting point EBA could build a far more resilient framework to determine risks and then choose appropriate risk factors leading to better K-factors. The distinction between agency and own account is fundamental. When working on an agency basis, an investment firm does not incur market, credit or counterparty risks. Its only risk is operational and it does not matter that it may hurt clients, market participants or the firm itself. Conversely, when acting on own account, the total of risk to the firm, to customers and to the market has to be taken into account. However the type of arrangements that have been taken with clients may largely mitigate some risks: for example segregation of assets and insurance mechanism are key factors of protection for clients and reduction of risk.
Question 6: What are your views on the initial K-factors identified? For example, should there be separate K-factors for client money and financial instruments belonging to clients? And should there be an RtM for securitisation risk-retentions? Do you have any suggestions for additional K-factors that can be both easily observable and risk sensitive?
Amundi does not agree with K-factors identified by ESMA. With our experience as an asset manager we believe that some show a misconception of where real risk is present.Yes, we agree that an asset manager who acts as sponsor of a securitization and retains part of the risk as foreseen in §44 should present an adequate level of capital to support this activity. It is a risk factor that we understand and we urge regulators to align the capital requirement for that sort of bank-like activity to what is expected from banks, whatever the type and nature of the entity carrying the business. The same should apply in our view for all bank-like activities including the management of the own portfolio of an asset manager, not only the trading portfolio but also the necessary seed money.
We strongly oppose the idea that size is a proxy for risk. It is the predicament of the use of AuM as a K-factor and we do not share it. Firstly, asset managers are tightly supervised, produce heavy reporting; they must comply with strict regulations on their products, like UCITS, and their organization as a firm (AIFMD); they have fiduciary duties to their client investors who monitor them and their performance very closely. The sanction for an asset manager is the redemption that clients may decide at any time without any justification. As a result of all these converging elements asset managers have built strong risk management processes and developed a real expertise on risk control. Secondly, the larger companies who have larger AuM have often been leading the market, since they are able to invest more and more rapidly. In that respect size is a proxy for quality. It is a fact that only smaller firms have defaulted in the asset management industry. Larger firms have been able to face heavy redemptions without difficulties. The example of Pimco over the last years is very illustrative in that respect. Thirdly, the size of assets under management is dependent on the capacity of an asset manager to address different investor types and offer efficient investment solutions to a variety of target markets. Those clients have various objectives, delegate a large or a small part of their assets, split their delegations to many or a few managers, they face different liabilities with different time horizons under different regulations and with different risk appetite and governance…in one word, size is a proxy for diversity and a factor of risk-mitigation. Fourthly, many of these investors are regulated entities which have to report their exposures monitor their risk and meet own capital requirements. In these instances, risk is addressed at the level of the investor and regulators should avoid to duplicate requirements. If considered to assess risk AuM should in any case be deflated from the mandates and subscriptions of prudentially regulated investors. AuM ex assets of regulated entities would be more appropriate.
Question 7: Is the proposed risk to firm ‘up-lift’ measure an appropriate way to address the indirect impact of the exposure risk a firm poses to customers and markets? If not, what alternative approach to addressing risk to firm (RtF) would you suggest?
No, we believe that the exposure risk of a firm can more efficiently be assessed through a proper mapping and evaluation of real risks incurred. We do not agree that RtF is a specific risk that should be tackled: the usual grid to analyse risk as credit, counterparty, market, liquidity and operational risks is more efficient in our view. Asset managers for example would be concerned for their eventual bank-like activities that impact their balance sheet and on the basis of their operational risk.We, nevertheless, share the view that an uplift factor linked to the leverage of a firm is an appropriate way to put some “skin in the game” with an extra capital buffer. We insist that the measure of leverage in this case should be consistent with the net exposure approach already developed under UCITS directive. We benefit from a long experience and many clarifications have been made public by regulators on the way to assess this leverage through net exposure.
Question 8: What are your views on the ‘built-in’ approach to delivering simpler, proportionate capital requirements for Class 3 investment firms, (compared to having a separate regime for such firms)?
Amundi clearly favours a separate and real simple regime for smaller firms and does not consider that a proportionate application of a standard regime would satisfy the demand for simplicity expressed as a principle in recommendation 1 of the EBA Report referred to in §14. We touched upon this issue when answering question 3; please refer to it. Size should be considered in terms of cumulative risk and as a consequence the number of asset management firms that could benefit from this separate regime should be significantQuestion 9: Should a fixed overhead requirement (FOR) remain part of the capital regime? If so, how could it be improved?
Fixed overhead requirement for capital (FOR) is a sensible tool to grant financial stability. In our view it is designed to wind down a business orderly. It does not relate to the coverage of real risks but pursues a different objective. We think that the minimum FOR of 3 month of expenses is appropriate and should be maintained as a minimum level for own capital in all circumstances. It should be only the first layer of capital and should be complemented by extra capital required according to the real risks of the business. For pure asset managers the minimum capital requirement would be FOR + coverage of operational risk. To a certain extent that could be covered, from a threshold to a cap, through a percentage of AuM. It would offer a real simplicity in accordance with the objective for class 3 entities. Threshold and caps are necessary to reflect the absence of linearity between size and operational risk. For example UCITS regulation foresees a 2bp capital requirement based on AuM exceeding 250 million and with a total cap of 10 million on capital.Amundi recommends that the discussion about the comparison between FOR and Initial Capital Requirement (ICR) be disregarded. FOR and ICR are not comparable and do not share the same objective. As its naming clarifies ICR is determined as the minimum capital at the beginning of business, it very much relies on estimates of the development of the business over the first years of the Investment Firm. One may expect regulators to take as reference the cash needed to face initial investments and current costs of the firm over several years, i.e. till the business becomes profitable. It is in no way comparable to the FOR which requires 3 month of expenses to be available to unwind the business if needed. We note that FOR estimate does not imply that the company will close in 3 month but that the cost of closure might create a gap of money that roughly amounts to 3 month expenses. There is no rationale in suggesting that FOR should be at all times higher than ICR.
Question 10: What are your views on the appropriate capital requirements required for larger firms that trade financial instruments (including derivatives)?
We believe that bank-like activities, and trading especially when it implies market making is typically one, should be regulated the same way whichever the nature and status of the entity. Banks can either use a standard method or a model to calibrate their risk and, hence, determine the capital required. The same should apply to investment firms.Question 11: Do you think the K-factor approach is appropriate for any investment firms that may be systemic but are not ‘bank-like’?
In Amundi’s view it is highly premature to take views about the eventual existence of non- Bank non-Insurance Systemically Important Financial Institutions (NB NI SIFIs). FSB started a discussion on this very sensitive issue and included asset managers as a potential target for systemic impact. A couple of consultations and several hearings and workshops with professionals later, FSB postponed any decision on the possibility that asset managers might be systemic. It preferred to further investigate activities that may introduce vulnerabilities in the asset management industry and focused on liquidity, leverage as well as the non-agency business issues, especially lending agent’s guarantees.We urge EBA not to take any position on the NBNISIFIs and a fortiori not to judge of the appropriateness or calibration of K-factors to entities whose qualification as systemic is far from being determined.
Question 12: Does the definition of capital in the CRR appropriately cater for all the cases of investment firms that are not joint stock companies (such as partnerships, LLPs and sole-traders)?
N/AQuestion 13: Are the cases described above a real concern for the investment firms? How can those aspects be addressed while properly safeguarding applicable objectives of the permanence principle?
N/AQuestion 14: What are your views on whether or not simplification in the range of items that qualify as regulatory capital and how the different ‘tiers’ of capital operate for investment firms would be appropriate? If so, how could this be achieved?
The structure of regulatory capital designed for banks in CRR is very elaborate; it evidences the capacity to innovate of the profession and the regulators’ ability to operate fine tuning. We do not think that the same level of fine tuning is necessary for most IF and in particular asset managers. Therefore, we suggest that the general framework of the different tiers of regulatory capital apply to IF without taking on board all the peculiarities. In our view, it is more important to focus on the real level of risk of IF, which is very limited for asset managers, and the proper calibration of corresponding capital requirements. Question 15. In the context of deductions and prudential filters, in which areas is it possible to simplify the current CRR approach, whilst maintaining the same level of quality in the capital definition?Question 15: In the context of deductions and prudential filters, in which areas is it possible to simplify the current CRR approach, whilst maintaining the same level of quality in the capital definition?
Amundi does not support the idea that the prudential regime for IFs should be a copy –paste of CRR that applies to banks. Yes, any capital requirement must be properly calibrated and that implies deductions, netting and filters. But those should be determined according to a proper assessment of risks of the IFs and not result from the import of practices that have been conceived for, and specifically for, one industry: banking.As an asset manager, we think that ESMA is best positioned to proceed with the necessary exercise of mapping risks, deciding netting and filters, and then calibrating regulatory capital requirements in our industry. Conversely, for bank-like activities we do favour the total alignment of requirements for banks and non-bank entities.
As a member of a banking group, Amundi would like a clarification to be made on the absence of duplication of requirements. Since we are already prudentially regulated, whatever the conclusions and calibrations of a new IF prudential regime we should not be impacted. We nevertheless fear that regulators may add up requirement in an unbearable manner and would like clearance on this point.
Question 16: What are your views overall on the options for the best way forward for the definition and quality of capital for investment firms?
As a principle, we do not like cross sectorial regulations that may overlook specificities of each sector. We consider that banking and asset management are totally different businesses and that there is no reason that the same standard should be valid for both. However, when it comes to defining regulatory capital, we tend to think that it is possible to harmonise. We acknowledge, though, that the degree of involvement of banking authorities in most member States is far bigger than that of securities market regulators which usually supervise a much larger number of entities. Consequently we think that, as mentioned under question14, some streamlining and simplification within the banking regime would be welcomed for IF.Question 17: What are your views on the definition of initial capital and the potential for simplification? To what extent should the definition of initial capital be aligned with that of regulatory capital used for meeting capital requirements?
Please refer to our answer to question 9 above where we consider that ICR is an original concept that is specially designed to cover the initial period when the IF launches its activities and when estimates are the only available data. FOR and capital requirement to cover risks are 2 other different concepts and we do not see any possibility to find an alignment between those 3.Question 18: What aspects should be taken into account when requiring different levels of initial capital for different firms? Is there any undesirable consequence or incentive that should be considered?
Pure and perfect competition requires in liberal economy that the access to a business should not suffer barriers. On the other hand, investor protection requires regulators to impose minimum safeguards. We think that proportionality applies and that different firms may have different requirements for initial capital. The level of real risk is what justifies such a differentiationQuestion 19: What are your views on whether there is a need to have a separate concept of eligible capital, or whether there is potential for simplification through aligning this concept with the definition of regulatory capital used for meeting capital requirements?
We dare hope that IF will be able to avoid introducing the concept of eligible capital in their prudential regime. We strongly advocate for a single definition of tiers of capital and their contribution to the regulatory capital requirement.Question 20: Do you see any common stress scenario for liquidity as necessary for investment firms? If so, how could that stress be defined?
If EBA had made a distinction between agency and balance sheet activities, it would have clarified the discussion about liquidity. In the business model of asset management, there is no position held on the balance sheet, all investments are made either on behalf (if a managed account) or in the interest (in collective investment scheme) of an end investor. This end investor bears the risks relating to the exposure to a financial market. Liquidity of the underlying market where assets held in the client’s portfolio trade is an issue that is addressed. The sectorial regulation for funds and asset management does require a close monitoring of the possibility for investors to redeem or sell their investments. Stress test on liquidity is a specific requirement under AIFMD as well as for MMFs under the soon to be applicable MMFR. However it does not impact in any manner the asset management firm, be it an investment firm or not.Consequently, Amundi cannot express views on a topic, liquidity, that does not concern asset managers at all. We strongly advocate for a carve out for asset managers in that respect and totally oppose the “one size fits all” approach that EBA is considering.
Question 21: What is your view on whether holding an amount of liquid assets set by reference to a percentage of the amount of obligations reflected in regulatory capital requirements such as the FOR would provide an appropriate basis and floor for liquidity requirements for ‘non-systemic’ investment firms? More specifically, could you provide any evidence or counter-examples where holding an amount of liquid assets equivalent to a percentage of the FOR may not provide an appropriate basis for a liquidity regime for very small and ‘non-interconnected’ investment firms?
Please see our response to question 20.Question 22: What types of items do you think should count as liquid assets to meet any regulatory liquidity requirements, and why? (Please refer to Annex 4 for some considerations in determining what may be a liquid asset).
Please refer to our response to question 20.Question 23: Could you provide your views on the need to support a minimum liquidity standard for investment firms with the ability for competent authorities to apply “supplementary” qualitative requirements to individual firms, where justified by the risk of the firm’s business?
Please see above our response to question 20.Question 24: Do you have any comment on the need for additional operational requirements for liquidity risk management, which would be applied according to the individual nature, scale and complexity of the investment firm’s business?
Yes, the approach considered for a liquidity regime overlooks the mere fact that only balance sheet activities are concerned. All IFs acting on an agency model should be exempted from this liquidity regime.Question 25: What are your views on the relevance of large exposures risk to investment firms? Do you consider that a basic reporting scheme for identifying concentration risk would be appropriate for some investment firms, including Class 3 firms?
We would like to make 2 comments:• In §138, the DP underlines the vulnerability of firms acting on an agency basis who may not figure out the concentration of risks they have. This statement sounds as pure speculative thinking without any foundation in our ears. Asset managers have stringent obligations of dispersion when investing and using counterparties. There is clear evidence in our profession that concentration risk is continuously monitored and breaches are effectively sanctioned. Furthermore reporting is manifold and very detailed. For other IFs acting as agent, we believe that large exposures are difficult to build when there is not much on the balance sheet.
• By hypothesis, class 3 firms are small in terms of risk and interconnection. There is consequently no need to impose on them an unnecessary burden of reporting.
Question 26: What are your views on the proposed approach to addressing group risk within investment firm-only groups? Do you have any other suggested treatments that could be applied, and if so, why?
N/AQuestion 27: In the case of an investment firm which is a subsidiary of a banking consolidation group, do you see any difficulty in the implementation of the proposed capital requirements on an individual firm basis? If so, do you have any suggestion on how to address any such difficulties?
Amundi is part of a banking group and as such prudentially consolidated within Credit Agricole. The mother company of the asset management group, Amundi, is itself a licensed entity regulated under CRR. We do apply banking prudential regulation at the subgroup level before consolidating within Credit Agricole group. We do encounter difficulties especially when considering intragroup positions such as the funds that we manage that are held in the own portfolio of other entities of the banking group or when justifying the absence of step in risk. As a general rule we openly discuss the issues that we face with our auditors and/or the national authority.Our main concern is to avoid duplication of rules and requirements. Being subject to CRR should exonerate Amundi from any other prudential regulation. The IF new regime might be used as a source for proper ways to analyse specific risks and enhance the relevance of some pillar 2 approaches, but it should not impact calculation of capital requirements. We could not face the introduction of a supplementary capital buffer on top of what CRR requires. Alternatively, Amundi could be exempted from those requirements which are equivalent to specific provisions under sectorial asset management regulations : we ask for consistency and absence of duplication. Regulators should keep in mind that asset management is a highly competitive industry and that apparently small differences in regulation can have dramatic consequences and overly penalize some actors when compared to their direct competitors.
Question 28: What other aspects should the competent authorities take into account when addressing the additional prudential measures on an individual firm basis under the prudential regime for investment firms?
This question is for us a new opportunity to stress that asset managers are required to organize an independent risk management function and have done so for years now. For example in France, the head of risk management is further required to be cleared by the AMF.Question 29: What examples do you have of any excessive burden for investment firms arising from the current regulatory reporting regime?
Asset managers are IFs of a special nature and they tend to be overloaded with regulatory reporting, not to mention internal and commercial reporting to investors. They have to comply with reporting under their own sectorial regulations such as UCITS, AIFMD and soon MMFR, the regulation of their market activities such as EMIR, MIFIR, MAR/D and now SFTR, the regulations of their clients who expect help, typically for Solvency 2 and Basel regulations, the regulation of their commercial activities with MIFID and soon SRD… Reporting is burdensome when it duplicates data, is not standardized in the fields definition, the format, the timing, the venue for transmission and when there is no understanding of the potential usage of data transmitted for a better regulation or financial stability.Let us take some illustrations:
• Dual reporting under EMIR seems to only result in a huge number of false signals whereby a reporting is rejected because it does not match with the equivalent reporting from the counterparty; in many instances the mismatch is either on a non-significant field or totally formal. It is rather distressing that the terrible experience on EMIR did not appear sufficient for legislators to avoid repeating the requirement for dual reporting under SFTR. The funny part of it is that the regulation foresees an assessment of the efficiency and the interest of the dual reporting before the review of SFTR. A test of the efficiency of the single sided reporting before requiring dual only if necessary would have made more sense.
• EMIR reporting is a good example where actors get the feeling that regulators receive too many data and are not able to process them and draw conclusions. Probably the inclusion of exchange traded derivatives in the reporting obligation has increased the flow of information (when the data of CCPs was easily accessible to get information without imposing too much on all actors).
• Data required under MIFID is another example of excessive reporting for a limited usage. Reporting the name of the trader and the decision maker of a trade on the investor’s side is supposed to help when investigating on a suspicion of market abuse. In other words it is useless information in 99.9% of the cases. It would have been more efficient to improve the former investigation right of the NCAs through the chain of transmission of the suspected order.
• Solvency 2 has brought to light another issue with reporting, the intellectual property right and the need to pay a license to Credit Rating Agencies to provide insurance clients with the rating of their investments and be able to populate their regulatory report.
• The same fields are required to be reported in different manners under different regulations. It is not difficult when standardization and uniqueness are ensured, like for LEI, but there are other data where standardization is not achieved.
• Time stamp under MIFIR will be adjusted at the microsecond in many instances and included in the reporting. It is an extra burden to ensure accuracy at that level and when knowing that the aim is to track high frequency trading (HFT), we feel the collateral cost involved as totally disproportionate. In order to put some substance in HFT and have it participate to the price formation mechanism instead of interposing for a micro second, regulators have other means that are both costless and totally efficient: increase the tick size, forbid subsidized transaction costs for HFT, impose latency of a couple of seconds before withdrawing an order…
We are impatient to see European authorities develop a central data basis where actors would deposit data on all items that are necessary for servicing all reporting requirements. This hub would be accessible to authorities according to their needs and rights. A unified and unique data base would need some time to be implemented, but the IT developers would certainly be motivated to act promptly if there were an engagement that the channel for regulatory reporting would be unique and harmonized.
Question 30: What are your views on the need for any other prudential tools as part of the new prudential regime for investment firms? And if required, how could they be made more appropriate? In particular, is there a need for requirements on public disclosure of prudential information? And what about recovery and resolution?
We agree with the remark in §165 that macro prudential tools specifically designed for IFs should be considered for activities that are not bank-like activities. We further believe that ESRB is legitimate to supervise works in this field. We have already mentioned our agreement that leverage measured on the basis of the net market exposure is important to monitor as a prudential tool and could deserve a lift up approach on regulatory capital.We have a strong view that recovery and resolution planning is appropriate for very large entities only where ordinary liquidation would impact not only clients but markets globally. It is true for most financial infrastructures and some may be IFs. It is not the case with most IFs acting as agent who have balanced positions for their clients and do not hold own account positions. We believe that sectorial regulations have covered most of the areas of concern but do not oppose the fact that a clean-up clause be added in the IF regime that would only apply in the absence of specific sectorial provision.
For public disclosure on prudential information, we think that it is for regulators to decide. They have to weigh, on the one hand, whether or not there is a risk of panic in disclosing information that might be distorted by medias and misinterpreted by non-professional market participants and, on the other hand, whether public interest requires transparency. We believe that only in very exceptional cases public disclosure would be appropriate.
Question 31: What are your views on the relevance of CRD governance requirements to investment firms, and what evidence do you have to support this?
Amundi thinks that if legislators and regulators have made a great job in defining governance requirements for banks, they have also accomplished the same achievement with other industries. More specifically regulation applying to asset management has specific provisions on governance. We do not think that CRD governance requirements are relevant for asset management and other activities that are directly regulated in this regard.Question 32: As regards ‘systemic and bank-like’ investment firms, do you envisage any challenges arising from the full application of the CRD/CRR remuneration requirements, and if so, what evidence do you have to support this? For all other investment firms, what are your views on the type of remuneration requirements that should be applied to them, given their risk profiles, business models and pay structures?
The trouble is that class 1 does not include only systemic and bank-like investment firms but also those which are part of a banking group. In that respect, we do consider that it is not workable to require asset managers who belong to a banking group to apply UCITS 5, AIFMD (which are very similar) and CRD (which differs). The sectorial regulation, more adequately designed for the activities an business model of the firm, should overcome any other rule.Question 33: What is your view on a prudential remuneration framework for other than ‘systemic and bank-like’ investment firms that should mainly aim to counteract against conduct related operational risks and would aim at the protection of consumers?
Asset management regulations, notably UCITS and AIFMD, do foresee strict rules for remuneration of key persons and risk takers. We believe that the general principle should be that sectorial rules overcome more generic requirements. A one size fits all approach is not the solution. Even if they may be suspected to be more flexible, sectorial regulations are designed to fit the habits and business models of a specific sector and they are established after consultation with those to whom they apply. We reiterate our view that it is not appropriate to require asset managers who belong to a banking group to apply UCITS 5, AIFMD (which are very similar) and CRD (which differs).For other IFs which are not “sectorially” regulated on remuneration, we think that proper attention should be paid to the activities and risks before defining a rule. In many instances, we believe that one or several of their activities impose remuneration rules for some employees; it is the case with sales persons under MIFID. The proper route is in our opinion to start from this existing regulation and expand its scope and/or amend its provisions if necessary and not to try and impose another framework like CRD/CRR designed for banks.
Question 34: What are your views on having a separate prudential regime for investment firms? Alternatively, should the CRR be amended instead to take into account a higher degree of proportionality? Which type of investment firms, if any, apart from systemic and bank-like investment firms, would be better suited under a simplified CRR regime?
Amundi is puzzled by the last part, 4.6, of the DP and this last but one question of the consultation. From the start EBA declares that it aims at creating a separate prudential regime for investment firms. It relies on the recommendations of its own report to have 3 different classes of IFs with different types of regimes. It then explains that what will be discussed in the DP is the regime specific to class 2 firms, since class 1 firms will be subject to CRD/CRR and class 3 firms should have a different, far more simple, regime. The architecture is clear and well designed. Now in Q34, EBA is simply questioning the whole initial hypotheses. It is not the way an architect is to conduct its remit.No, we do not agree with the principle of this question which intends to expand the scope of CRD/CRR to many other firms, even with proportionality. The issue has been discussed several times in the DP on specific points. The answer is that “one size fits all is not the solution”. Regulators should start from the proper analysis of risks of IFs and in priority make a distinction according to their business model: agency or own account.
Question 35: What are the main problems from an investment firm perspective with the current regime? Please list the main problems with the current regime.
Level playing field is the key question for Amundi. We suffer from competitive disadvantage since we are prudentially consolidated within a banking group and as such subject to stricter procedures and capital requirements for our activities. We support the introduction of a prudential regime for all asset managers that would take stock of the specific agency nature of our core business where there is mainly operational risk at the level of the AM firm. We believe that this regime should however put AM firms at par with other regulated entities as soon as they use their balance sheet and conduct bank-like activities.Upload files
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