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22 January 2017

Financial Times: Asset managers to face tougher systemic risk tests

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Asset managers are to face tougher tests to assess whether they could become the centre point of systemic risk, according to the head of Europe’s main markets regulator.

Steven Maijoor, chairman of the European Securities and Markets Authority, also called on the region’s policymakers to rethink the way they share oversight of the world’s clearing houses, another part of markets critical to market stability.

“Esma has already flagged that this year it will assess stress testing in the fund industry,” he said on a visit to London last week. “Additionally, our focus in this area is on issues such as liquidity management tools, leverage and stability.”

Its increased scrutiny on the asset management sector, which has boomed over the past decade, mirrors that of standard-setters and policymakers around the world.

There is a consensus that post-crisis reform of the banking sector is now largely in place or in train — and they are now thinking about how other parts of the financial system might be vulnerable.

The Financial Stability Board, which makes recommendations to the Group of 20 nations, laid out a 14-step plan this month to attempt to reduce risks from the sector to the rest of the financial system, such as encouraging stress tests.

Funds are also playing an increasingly large role in bond trading and other securities markets now that banks have scaled back their participation as middlemen matching buyers and sellers.

Mr Maijoor described the regulatory focus as “right” but added that it was “a very different sector to the banking one”.

“Any policy responses should take the different business model of funds into account, and securities regulators should be fully involved,” he added.

Full article on Financial Times (subscription required)

© Financial Times

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