In April 2000, Oxera, with Professors Julian Franks and Colin Mayer, produced an independent research report commissioned by the European Asset Management Association on capital adequacy requirements in asset management businesses across Europe. The report, published in January 2001, aimed to identify the main sources of operational risk in asset management and examine the appropriate regulatory response. There is considerable debate on the ability of capital requirements to provide investor protection against operational risks. In November 1999, the European Commission published its proposals to revise the capital adequacy requirements already imposed on credit institutions and financial firms. More recently, the Basel Committee on Banking Supervision published a second consultation document proposing to implement an additional capital charge for operational risk for banking groups. Details of the structure and regulatory framework of asset management industries in eight countries (France, Germany, Ireland, Italy, the Netherlands, Spain, the UK and the USA) are contained in the report, together with a review of relevant academic literature. Interviews were also held with asset managers and regulators. Information on losses arising from operational failures was obtained through a survey of 39 asset managers. The report concluded that the main sources of operational risk in asset management are informational asymmetries and fraud, not, in general, systemic risks. These market failures should be corrected directly by a combination of disclosure, auditing, enforcement, insurance, custody and trustees, rather than indirectly through capital requirements. The report also highlighted the impact of imposing capital requirements on the competitiveness of European asset managers, compared with their counterparts in the USA, where no capital requirements are imposed at the federal level.