BlackRock has become the latest asset manager to gear up its opposition to regulators’ repeated proposals to identify the industry as a source of systemic risk.
The world’s largest fund manager has published its detailed response submitted to a second consultation on the matter by the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO). The response deadline was May 29.
“The asset management industry regrets that some of the evidence it had previously put forward… has not been considered.” —EFAMABlackRock said it was “supportive of regulatory reform that effectively addresses systemic risks and improves market stability” adding that all investors benefited from properly functioning capital markets.
However, the $4.7 trillion fund manager laid out six separate sets of points as to why it thought risks in asset management should be addressed through “regulation of investment products and practices across the market ecosystem” rather than a “too big to fail” framework.
BlackRock said the FSB and IOSCO needed to understand asset allocation decisions taken by asset owners and warned that applying labels to the entire market would overlook the nuances within it.
The manager dismissed many of the points raised by the authorities in the second consultation as not applicable to the industry. Along with fellow fund giant Fidelity, BlackRock has been one of the most consistent managers to oppose FSB and IOSCO regulation in this area.
The UK’s Investment Association echoed these calls, saying regulators’ size-based proposals were not suitable for the asset management industry.
Likewise, the European Fund and Asset Management Association (EFAMA) urged regulators to take a fresh look at what they had already been told by the industry.
“The asset management industry regrets that some of the evidence it had previously put forward to illustrate the flaws of the FSB/IOSCO ‘entity-based’ approach has not been considered,” EFAMA said.
“EFAMA would recommend that regulators’ analysis of potential risks from asset management activities be assessed once empirical evidence has been gathered through recently enhanced reporting requirements, which would provide more accurate data supporting a fairer judgement of systemic risks,” the organisation’s statement concluded.
The second consultation was announced in March 2015.
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