LONDON: A top Bank of England official put the world’s $87 trillion asset-management industry on alert yesterday, saying it posed some of the same “too big to fail” risks that are being tackled by reforms at major banks.
Although asset managers such as Blackrock, Fidelity, Allianz and Axa do not make loans, which can put them at risk if borrowers default, they are still big enough to hurt the market, said the BoE’s executive director of financial stability Andy Haldane.
“Their size means that distress at an asset manager could aggravate frictions in financial markets, for example through forced asset fire sales,” Haldane said in a speech likely to upset the funds sector. Haldane said he was not proposing action now but described asset management as “the next frontier for macro-prudential policy,” referring to the kind of specific controls on credit and capital requirements central banks are imposing on banks.
“I don’t know at present whether the case is sufficiently strong for us as macro-prudential regulators to want to actively intervene,” he said. “But what I can say with 100 percent confidence is we need to better understand the market dynamics.”
In the United States, the Federal Reserve is showing more interest in asset-management firms, which so far have been regulated by securities supervisors.
Haldane, who is due to take over as the Bank of England’s new chief economist in June, has gained a reputation for bold thinking in his current role as head of its financial risk division. His speech at the London Business School’s Asset Management Conference effectively broadened the regulatory spotlight in Britain on asset managers from specific issues such as fees paid by investors.
Reuters
