FSB delays asset manager G-Sifi designations

Author: Ashley Lee | Published: 4 Aug 2015
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

On Friday the Financial Stability Board (FSB) announced that it would delay determining which organisations are non-bank, non-insurer global systemically important financial institutions (NBNI G-Sifis), following diverging consultation responses.

The March consultation focussed on identifying NBNI G-Sifis, but did not specify the policy measures that would apply if they were designated.

While investment funds and asset managers’ responses to the FSB's consultation made clear that they do not see themselves as systemically important to be designated NBNI G-Sifis, other respondents believed a framework is needed.

On Friday, however, the FSB said that it will wait to finalise the NBNI assessment until its work on risks from asset management is completed; that evaluation began in March.

"It is clear from the consultation responses that there is divergence of views and some way in reaching consensus about how to proceed for this group of institutions," said Royce Miller, head of Freshfields Bruckhaus Deringer’s financial services team in Asia.

This is seen as an especially difficult area to regulate as NBNI G-Sifis have different legal forms, business models and risk profiles. The FSB had already dealt with two types of NBNIs – finance companies and broker-dealers – in earlier consultations.

In its March consultation, the FSB proposed five common impact factors: size, interconnectedness, substitutability, complexity and cross-jurisdictional activities, although indicators of those factors would be tailored for specific NBNI types.

It is clear from the consultation responses that there is divergence of views

Asset managers and investment funds sought changes – if not total exclusion – from the G-Sifi designation framework.

The Securities Industry and Financial Markets Association’s Asset Management Group argued that investment funds and asset managers 'lack key characteristics possessed by other G-Sifis’, and have fundamentally different risk profiles. The Private Equity Growth Capital Council and the European Private Equity and Venture Capital Association’s joint response argued that the assessment methodology should focus on investment funds individually, and that private equity funds are not systemically important.

Others, such as the CFA Institute, supported the monitoring of investment companies but set out standards that the FSB should consider in its designation process.

The FSB’s work in this space is not yet complete. "It is in everybody’s interests that the FSB wait to finalise its assessment methodologies until more work on the financial stability risks has been completed," said Miller.

According to the FSB’s release, it will discuss its initial work on asset management and its potential financial stability risks at its plenary meeting in September. It will again report on its work to the G20 later this year, and plans to develop policy recommendations by spring 2016.

See also

Basel’s standardised approach heightens systemic risk

Sifi designation threat will determine GE buyers

Bill to amend Dodd-Frank passes Senate committee




close Register today to read IFLR's global coverage

Get unlimited access to IFLR.com for 7 days*, including the latest regulatory developments in the global financial sector, updated daily.

  • Deal Analysis
  • Expert Opinion
  • Best Practice


*all IFLR's global coverage published in the last 3 months.

Read IFLR's global coverage whenever and wherever you want for 7 days with IFLR mobile app for iPad and iPhone

"The format of the Review has changed over the years; the high quality of its substantive content has not."
Lee C Buchheit, Cleary Gottlieb