A diverse financial system will enhance capital formation, resilience, and economic growth
Brussels, Belgium – MFA urged the European Commission to strengthen EU competitiveness by supporting a diverse financial system in a comment letter submitted last Friday. MFA emphasised that fostering alternative sources of capital is critical to achieving the goals of the Savings and Investments Union and enhancing economic dynamism.
“The EU’s competitiveness depends on a financial system that can efficiently connect capital with businesses through a variety of channels,” said Jillien Flores, MFA Chief Advocacy Officer. “Private credit and other nonbank lenders expand and diversify access to financing, support job creation, and strengthen economic growth. Policymakers should ensure the regulatory framework supports these complementary financing channels and foster a more resilient financial system.”
NBFIs, including private credit funds, provide a growing share of financing to EU businesses and now account for roughly a quarter of credit to non-financial corporations. These firms complement banks by providing long-term, flexible financing that banks are constrained from holding on their balance sheets. Strong partnerships between banks and private credit managers also help reduce risks in the banking system while expanding access to capital across the economy.
MFA also urged policymakers to improve supervisory data quality and avoid duplicative or misleading reporting requirements. The letter highlights that current metrics can overstate risk and distort regulators’ understanding of market exposures. MFA further cautioned that any system-wide stress testing framework must be carefully calibrated to reflect the distinct structure and risk profile of NBFIs to avoid unnecessary costs that could limit the provision of finance to the real economy.
Read the full letter here.
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The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
