Amending Directive 97/9/EC on Investor Compensation Schemes (ICS): Safeguarding Investors' Interests by Ensuring Sound Financing of ICS

15-12-2010

This compilation of briefing papers deals with two specific issues in relation to the Commission Proposal to amend Directive 97/9/EC on Investor Compensation Schemes (ICS), more specifically on how to safeguard investors' interests by ensuring sound financing of ICS. The first two notes discuss the proposed borrowing mechanism (namely questions such as: Is the proposed compulsory borrowing mechanism an adequate solution which does not lead to moral hazard? Which alternatives to the mutual borrowing mechanism could be taken into account? Are there other sources for funding than the proposed borrowing mechanism with a view to avoid moral hazard?) and explore interim solutions in view of the proposed 10-year transition period to build up the final level of exante funding. In this regard, the notes cover approaches to protect investors within this 10-year period and possible alternatives, e.g. in terms of building up the target level and in terms of timing. The third and fourth note relate to funding principles and mechanisms. They evaluate in particular whether the proposed (ex-ante) target fund level of 0.5% is adequate in view of the products covered, the coverage level, and in view to the risk covered occurring in investment firms and UCITS. Furthermore, it is examined if the ex-ante funding as such is an adequate solution to finance the schemes.

This compilation of briefing papers deals with two specific issues in relation to the Commission Proposal to amend Directive 97/9/EC on Investor Compensation Schemes (ICS), more specifically on how to safeguard investors' interests by ensuring sound financing of ICS. The first two notes discuss the proposed borrowing mechanism (namely questions such as: Is the proposed compulsory borrowing mechanism an adequate solution which does not lead to moral hazard? Which alternatives to the mutual borrowing mechanism could be taken into account? Are there other sources for funding than the proposed borrowing mechanism with a view to avoid moral hazard?) and explore interim solutions in view of the proposed 10-year transition period to build up the final level of exante funding. In this regard, the notes cover approaches to protect investors within this 10-year period and possible alternatives, e.g. in terms of building up the target level and in terms of timing. The third and fourth note relate to funding principles and mechanisms. They evaluate in particular whether the proposed (ex-ante) target fund level of 0.5% is adequate in view of the products covered, the coverage level, and in view to the risk covered occurring in investment firms and UCITS. Furthermore, it is examined if the ex-ante funding as such is an adequate solution to finance the schemes.

Externe Autor

Marco LAMANDINI (University of Bologna) ; Kern ALEXANDER (University of Zurich and Centre for Financial Analysis and Policy University of Cambridge) ; Achim KASSOW (Member of the Board of Managing Directors, Commerzbank AG) and István FARKAS (economist, independent advisor, Budapest, Hungary)