ASSET MANAGEMENT AND DEPOSITARY REGULATION: A PROPOSAL FOR A SINGLE EU DEPOSITARY PASSPORT

Abstract

Depositaries provide services for hundreds of millions of people in the EU, yet neither an EU depositary licence nor a depositary passport is available for depositaries to operate in other member states on a cross-border basis. Discussion and debate concerning the potential introduction of a depositary passport has been on the regulatory agenda since the early 1990s. However, whether or not to implement a fully functioning depositary passport does not simply require a binary ‘yes’ or ‘no’; it requires navigation through and close investigation of a complex array of intersecting legal, regulatory, financial and economic matters. As such, the assessment conducted throughout this thesis involves analysis and evaluation of regulatory frameworks, supervisory requirements and trust theories, employing an interdisciplinary approach combining legal, financial and economic elements. A key finding of this thesis is that, in order to introduce a depositary passport, an appropriate managed mutual recognition framework must be introduced. The thesis argues that the introduction of an EU depositary licence and the enhancement of the existing supervisory framework (i.e. home & host cooperations, supervisory colleges, ESMA) are necessary prerequisites. It also proposes a prototype model of a depositary passport, involving the allocation of the applicable law (i.e. to either follow the home or host member state laws), and specification of supervisor responsibility (i.e. home or host NCA or centrally). This will foster trust between member states, national competent authorities and market participants and will both enable the introduction of a passport and ensure its efficient and sustainable operation.