The Belgian regulator is putting domestic institutions at a disadvantage by not implementing a recent European Union directive. The directive, known as UCITS III, allows mutual funds to use derivatives more extensively and then sell them throughout Europe.
The deadline for bringing the directive into effect in national legislation was February this year. Although a number of countries, including the Netherlands and Finland, missed the deadline the Banking, Finance and Insurance Commission (BFIC) in Belgium is one of the last. The Belgian parliament has passed the law to implement UCITS III, but it has not yet come into effect and it is not clear when this will be. Jean-Paul Servais, vice-chairman of the BFIC, did not return calls.
Wim Allegaert, head of structured products at KBC Asset Management in Belgium, said the situation is preventing the Belgian market from expanding into this new area of business. "It's awkward and a little uncomfortable," he noted. KBC is able to launch UCITS III authorized funds in other countries, such as Luxembourg, but not in its domestic market. Allegaert said the group would look to launch a UCITS III fund when the regulation is clarified in Belgium. Frederik Stoop, structured products manager at Fortis Investments in Belgium, said it would also like to launch a UCITS III fund. A structurer at a smaller Belgian distributor said further regulatory delay puts their group at a competitive disadvantage because they do not have the capacity to set up a UCITS III platform outside Belgium.
