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