Europe Gears for UCITS V Countdown

Europe’s member states is set to begin the one year countdown in which they will have until March 2016 to implement UCITS V regulations, putting additional pressure on depositary banks.

March 18th marks the start of the year-long process that will incorporate the UCITS V regulation into national laws, which will apply to 36,000 UCITS funds, accounting for $10 trillion or 72% of all European fund assets.

According to Rolf Bachner, managing director, EMEA Funds Product Manager at BNY Mellon, the requirements for depositary banks will be the toughest to implement, while also putting increased pressure on sub-custodians.

“Out of the three pillars which underpin the UCITS V regulation – remuneration, regulatory sanctions and depositary requirements – the depositary provisions are the most onerous, while those around remuneration will be viewed as the most contentious,” says Bachner.

“UCITS V also tightens the safekeeping delegation rules (in which) the sub-custodian must take ‘all necessary steps’ to ensure that the UCITS’s assets aren’t available to creditors should it become insolvent.”

Under the regulation, depositary banks will have to distinguish their custody and asset monitoring duties, while segregating the depositary’s own assets. UCITS V will also introduce a uniform list of oversight duties for any UCITS fund, including control of issue, repurchase and cancellation of shares, and control of NAV calculation.