The Financial Stability Board recently published recommendations for addressing structural vulnerabilities in the global asset management industry. The recommendations address certain industry activities that the FSB believes could present financial stability risks, including:
- liquidity mismatch between fund investments and redemption terms and conditions for open-ended fund units;
- leverage within investment funds;
- operational risk and challenges at asset managers in stressed conditions; and
- securities lending activities of asset managers and funds.
Also among FSB recommendations are plans to label some of the world’s biggest asset managers as systematically important. According to a Financial Times report, that plan was abandoned in 2015 after strong industry opposition, however the FSB plans to revive the project in 2019.