FSB suspends work on systemic risk posed by asset managers

The Financial Stability Board (FSB) has suspended work on regulation for asset managers aimed at addressing systemic risk concerns, falling into line with the International Organisation of Securities Commissions (IOSCO).

The FSB, a Switzerland-based organisation of financial policymakers and central bankers, consulted on additional regulations earlier this year.

Working together with the IOSCO, a market regulator umbrella group, the FSB was assessing whether asset managers were systemically important to financial markets.

The organisation could have proposed additional capital requirements on those asset managers or investment funds deemed systemically important, but it has now confirmed it will suspend its work until a wider financial-stability risk study is complete.

This follows on from an IOSCO statement in June, where the organisation said its immediate focus would be a full review of the asset management market in a global financial context, instead of systemic risk.

IOSCO chair Greg Medcraft told a conference in London that the problem of systemic risk should be tackled only after the market review, and that previous work identifying this should be reviewed.

The FSB said the market review would improve the analysis of stability issues and thereby inform any future assessments.

Its proposals originally focused on risks associated with market liquidity and asset management activities, including sources of vulnerability for asset managers.

Asset managers – which have downplayed their relative importance to the financial system, being mere agents for other investors – will welcome the decision.

Vanguard and BlackRock, responding to the FSB and the IOSCO’s consultation earlier this year, argued that managers were just one component of the market and called for a wider focus on markets and asset classes.