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06 December 2012

IMA: Living wills are needed but not for asset managers

Responding to the Financial Stability Board's consultation on recovery and resolution planning, the Investment Management Association welcomed efforts to ensure firms have suitable resolution plans but said that the fund management industry should not be included in such a regime.

Unlike deposit institutions, fund management firms keep all client money completely separate from their own assets. Therefore, if the fund manager fails client assets would be protected. Furthermore, fund managers already have robust wind-down arrangements, which in the UK are governed by the Financial Services Authority’s (FSA) Individual Capital Adequacy Assessment Process (ICAAP).

IMA urges the FSB to consider implementing a framework to maintain the continuity of some critical services provided by banks and used by fund managers which appear to have been overlooked. These include payments, wholesale activities and capital market activities.

Irving Henry, IMA Prudential Specialist, said: “Fund managers do not hold client assets and already have adequate wind-down arrangements. Unlike the banks no asset manager failed as a result of the 08 crisis nor did any require government support. There is no justification for including fund managers in this regime.”

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