On October 15, 2016, the Systemic Risk Council submitted a comment letter to the Financial Stability Board (FSB) on its recent Consultative Document, in which the FSB proposed policy recommendations intended to address structural vulnerabilities in the asset management industry.
In its letter, the Council expressed its support for the FSB’s work on potential risks to financial stability arising from asset management structures and practices. The Council offered broad comments under the four categories identified in the Consultative Document: (1) liquidity mismatch; (2) leverage within funds; (3) operational risk and challenges in transferring investment mandates or client accounts; and (4) securities lending activities of asset managers and funds. The Council offered six recommendations relating to the four categories for the FSB’s consideration.
In addition, the Council identified and discussed a possible area for further work by the FSB relating to unlevered funds that do not offer frequent redemption opportunities as well as provided an observation on issues that it believes should be covered in the FSB’s planned future work on pension funds.
Read the full letter here: Systemic Risk Council Letter to FSB on Asset Management Activities