Global policymakers are stepping up their efforts to address systemic risks emanating from the asset management industry.
The Financial Stability Board (FSB) on Wednesday published a set of proposed policy recommendations today that deal with four basic financial stability risks that may originate in the asset management sector, including: funds use of leverage; securities lending; liquidity risks; and,the operational risks associated with transferring investment mandates in stressed conditions.
The proposals, which are out for public comment, feature 14 policy recommendations that aim to give asset management firms and regulators tools to identify and deal with these risks.
In particular, "issues associated with liquidity mismatch and leverage are considered key vulnerabilities," the FSB says in a statement. The recommendations for liquidity mismatch focus on open-ended funds (including exchange-traded funds (ETFs), but excluding money market funds). The recommendations targeting leverage risk would apply to all types of funds that use leverage.
In the other major areas, the FSB's recommendations on operational risk focus on large, complex, asset managers, or those that provide critical services. The proposals dealing with securities lending focus on asset managers as lending agents.
The FSB is aiming to finalize its policy recommendations in this area by the end of 2016. Its proposals are out for comment until Sept. 21.
Also on Wednesday, the International Organization of Securities Commissions (IOSCO) issued a public statement outlining its efforts to address data gaps in the asset management industry. "More needs to be done to enhance the data collected in this sector," IOSCO says in a statement, and the group of global securities regulators is analyzing what data needs should be prioritized. "A key priority is to encourage IOSCO members to collect data with a view to better identify systemic risk," the IOSCO statement adds.