An industry body arguing that asset management is not systemically risky has broadly welcomed recent proposals from the main authority investigating the issue.
European Fund and Asset Management Association (Efama) director general, Peter De Proft, said the Financial Stability Board (FSB) recommendations reflected a more balanced view of the industry than previously and acknowledged measures were already in place to control risks.
The FSB published its ‘Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities’ on January 12.
In a statement, Efama said: “From a preliminary assessment, we believe that the final recommendations go in the right direction, in the sense that they do not identify a need for any substantial regulatory reviews of existing standards, and recommend that Iosco [International Organization of Securities Commissions] develops additional and more detailed guidance to be carried out by end-2017 and end-2018.”
The trade body also said: “Despite the fact that some of the speculative narrative around potential risks stemming from liquidity mismatches in open-end funds has been retained in the final report, we welcome the fact that several of the risk mitigants highlighted by Efama in our responses have been acknowledged by the FSB in its final report.”
Efama also said the FSB continued to overstate operational risks because EU regulation and industry best practices “largely already address the FSB’s concerns”.
Operational risks, according to the FSB, might include the transferal of client accounts from a manager under stress to a stable manager, perhaps because of incompatible IT systems between the two managers.
Business contingency plans and capital requirements for managers to cover risks are two examples of how the industry, at least in some jurisdictions, managed these risks, the FSB acknowledged.
Securities lending risks were also “overstated”, according to Efama.
The Investment Company Institute recently called the FSB views on liquidity risk in open-ended funds “flawed”.
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