On 18 April 2013, Central Bank Director of Markets Supervision, Gareth Murphy, addressed the Funds Congress 2013 and identified five particular priorities for the extensive regulatory reform agenda:

  • improved monitoring of all financial services activities;
  • building a safer system for derivatives clearing;
  • ensuring that the production costs of investment products are fair and perceived to be fair;
  • building a reliable framework for the resolution and orderly failure of financial entities;
  • the immediate priorities in Europe relating to the impact of a weak bank on sovereign states and the real economy.

As regards banking and shadow banking, Mr Murphy noted that where promoters seek to create funds which hold loans (as opposed to securities), the traditional functions of loan origination and loan servicing are often carried out at the behest of the promoter. It is important that when funds hold loans that they are not prone to run risk (which would interrupt the flow of credit) and that the incentives of non-bank loan originators are aligned with investors in funds which hold these loans (so as to avoid mispricing of credit).He also noted that it is important that the approaches to regulatory reform in the area of money market funds focus on the key issue of mitigating investor runs which, he noted, can afflict all types of open-ended funds, and that policy-makers are not distracted by differences in valuation methodology, which though important, skirt around the central issue of systemic concern.

As regards distribution of funds products, Mr Murphy highlighted the importance for industry to recognise that cost transparency and product appropriateness will support a healthy long-term relationship between investors and the industry.