SEC Chair Jay Clayton and Division of Economic Risk Analysis Chief Economist and Director S.P. Kothari highlighted measures taken to address current capital market risks.
In their public statement, Chair Clayton and Dr. Kothari described how the SEC has coordinated guidance with other financial regulators and industry authorities on the risks and impacts of COVID-19. The communications among domestic and international regulators involved global banking, housing finance, commodities and cybersecurity.
In addition to monitoring the global market, Chair Clayton and Dr. Kothari described two ongoing agency initiatives:
- The SEC's stated objective of the Interconnectedness Initiative is to "identify, analyze and clarify" risks to the stability of both the domestic and global financial systems. The initiative aims to examine the "interconnections" among credit origination, risk transmission and investment exposure in order to identify where a change in a risk assessment in one area of the financial system may impact risk-based price movements and capital flows in another.
- The SEC's intention behind the "Initiative on the Effects of Mechanistic Portfolio Management Guidelines/Restrictions" is to collaborate with other regulators and market participants to examine whether mechanistic investment guidelines and performance benchmarks (e.g., rules that require portfolio rebalancings, asset sales or capital charges when a party's credit rating is downgraded) should be temporarily reconsidered.
Primary Sources
Originally published 14 May 2020
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