On Wednesday, March 25, the Systemic Risk Council responded to a request for comment by the Financial Stability Oversight Council (FSOC) about asset management products and activities.

The letter states:

“We commend the FSOC for undertaking a comprehensive review of the asset management industry, consistent with its statutory responsibilities to identify and address systemic risks. We encourage the FSOC to work closely with its constituent agencies, and particularly the SEC, in addressing the systemic risks associated with asset managers. It seems clear that additional data collection is needed to understand the potential systemic risks in many areas of asset management and that further data analysis may well warrant additional regulations pertaining to leverage, liquidity, and redemption policies for high-risk funds. In other areas, such as securities lending, the risks are known and ripe for regulatory standards. In all areas, we would encourage the FSOC to work closely with the SEC in light of that agency’s considerable expertise and long experience in overseeing the asset management industry.  Finally, the FSOC should consider whether and to what extent any future regulatory-driven market developments and products (e.g., bail-in debt issued by banks) could affect the asset management industry in a manner that gives rise to additional systemic risks.”

The full letter can be found here: SRC Letter to FSOC Re Asset Management Products