FSB concerned about asset management

The Financial Stability Board (FSB) is concerned about structural risks of the asset management industry. Although there was recently no stress phase that has jeopardised the stability of the financial system, the risks to the systems are increased by the significantly higher activities of asset managers. The international organisation, in which the central banks, supervisory authorities and finance ministries of the G20 countries are represented, developed 14 policy recommendations to make investment funds more sustainable and secure. The FSB addresses four topics in particular:

  1. Funds that provide daily liquidity may become hazardous when investing in illiquid markets if the assets can not be liquidated quickly enough to redeem investors. To solve this problem, more transparency, as well as further stress tests from the supervisory authorities, should be implemented.
  2. The FSB also intends to improve the internal monitoring of borrowed funds.
  3. Especially in financial stress situations, the Financial Stability Board identifies operational risks. The FSB, therefore, wants to ensure that the systems and business practices of the funds are adapted to the respective risk level.
  4. Finally, the FSB wants to improve security guarantees of asset managers towards their clients.