A Case Study of the Asset Management Industry: The Need for Governance Regulation in the Current Prudential Framework Presented by: Mr. Franko Date: 10 June 2020 The Prudential Framework: From Two To Three Building Blocks.... - Prudential norms - Supervision - Governance regulation A Case Study: Asset Managers And Their Funds - Example: a Corporate Bond Index Fund 1. Illiquid corporate bond market 2. First-movers advantages 3. Systemic run? - Systemic risk due to liquidity mismatch Prudential Norms - - Liquidity mismatch • UCITS-Directive • Investment policy • What is a liquidity asset? Problem: incompleteness prudential norms Supervision - Solution For The Incompleteness Of Prudential Norms? • Supervisory competition regarding prudential requirements? - • Nature of the supervision? • The locus of information? Need for governance regulation Governance Regulation - Governance arrangements provide perverse incentives in times of distress - There is a need for a transfer of control in times of distress to the prudential authorities - Why not a hard and fast rule? - Importance ESMA's supervisory convergence powers