The Financial Stability Board ("FSB") proposed 14 policy recommendations that address structural vulnerabilities caused by asset management activities that have the potential to present financial stability risks.
The proposed recommendations address structural vulnerabilities concerning:
- liquidity mismatches between (i) fund investment assets and (ii) redemption terms and conditions for fund units;
- leverage within investment funds;
- operational risks and challenges in transferring investment mandates during stressed conditions; and
- the securities lending activities of asset managers and funds.
In a public statement responding to the recommendations, IOSCO outlined priorities regarding data gaps in the asset management industry. IOSCO asserted that it will work with the FSB to address structural vulnerabilities, including enhancing data collection, and reducing data gaps around open-ended regulated collective investment schemes.
The FSB noted that it intends to finalize the recommendations by the end of 2016, after which some of the recommendations will be put into operation by IOSCO and relevant FSB working groups. Comments on the proposed policy recommendations must be submitted by email no later than September 21, 2016.
Commentary
To what extent will prudential regulators and the SEC act, by choice or compulsion, in a manner that is consistent with the FSB's recommendations?
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