|Christopher Condon and Ian Katz|
Companies overseeing a combined
“A certain combination of fund- and firm-level activities within a large, complex firm, or engagement by a significant number of assetmanagers in riskier activities, could pose, amplify or transmit a threat to the financial system,” the Treasury’s
The study was conducted by the OFR to help the
“The council will review the study closely as it considers potential next steps relating to asset management activities and firms,” Treasury spokeswoman
The council is authorized under the Dodd-Frank financial regulatory law to identify companies that could pose a threat to stability. The Fed can impose on such firms tighter capital, leverage and liquidity rules and demand measures including stress-testing and wind-down plans.
The council, or FSOC, is led by Treasury Secretary
“We continue to believe that designation as systemically important financial institutions, or ‘SIFIs,’ is not an appropriate regulatory tool for addressing risks, if any, that registered funds or their advisers might raise regarding financial stability,”
The ICI is the trade association representing the mutual funds industry.
“BlackRock will continue to work with regulators to promote a more stable and well-functioning financial system and we support their efforts to increase transparency, protect investors, and facilitate responsible growth of capital markets,”
FSOC has designated three non-bank financial companies —
Exchange-traded funds “may transmit or amplify financial shocks originating elsewhere” by pooling assets into illiquid investments, like emerging market stocks or high-yield debt, the OFR said. ETFs are baskets of securities, typically tracking an index, that trade on an exchange like stocks.
“Herding into more illiquid investments may have a greater potential to create adverse market impacts if financial shocks trigger a reversal of the herding behavior,” the OFR said.
“I don’t think the asset managers will like the study because some parts of it read like the FSOC’s analysis when they designated AIG and Prudential,” said
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