The European Union must prioritise non-bank finance and deeper capital markets as part of its regulatory review, according to the Alternative Investment Management Association.

AIMA made the comments in its response to the European Commission’s call for evidence to do with European Union regulations for financial services, which it made in September 2015. In its response, AIMA says that capital market financing is more long-term and transparent and encourages greater innovation and discipline, which then leads to better allocation of resources and economic growth.

However, regulatory barriers still prevent capital markets and non-banking finance from developing further in the EU.

AIMA is making the case that rules should allow greater asset managers’ participation in securitisations in order to support the supply of finance to small and medium-sized enterprises (SMEs). AIMA also argues that greater holding of financial assets by investors - among them HNW investors - who can bear risk without the need for public support (such as investment funds) will improve financial stability. It is also stressing:

• the need to consider the reform of market infrastructure to support liquidity as agreed standards are implemented;
• the need to look again at regulatory reporting to ensure that supervisors are collecting the right data in the most effective way possible;
• the importance of finalising the EU internal market in fund distribution and opening this market up what it calls 'third country funds'; and
• the need to review public short-selling disclosure requirements which has hurt equity market liquidity.