Financial Regs: A Top Concern for Institutional Investors

(July 28, 2010) — Preliminary findings by Capital Market Risk Advisors show 37% of executives at pension funds, sovereign wealth funds, investment management firms and other institutional investors believe the financial reform act signed by President Barack Obama July 21 will make the financial market system safer.

The firm’s 2010 Risk Concerns Survey, which was conducted over two weeks, closing July 20, found that US respondents ranked “government changing the rules” as their chief concern for the year ahead. Market volatility and credit losses tied for their second highest-ranking concern. Additionally, risk due diligence by clients, regulators and rating agencies increased by 54%, 64% and 44% respectively.

“It is disappointing but not surprising the ‘Government Changing the Rules’ remains the #1 concern for U.S. participants for the 2nd year in a row,” said Leslie Rahl, Managing Partner of CMRA, in a statement.

CMRA’s findings were based on risk-related concerns, including risk budgeting, risk appetite statements on limits and liquidity, stress testing. The firm plans to release the full survey August 2.

Last week, President Obama signed the most powerful financial rules since the Great Depression, asserting that the reform would help foster innovation while ensuring everyone follows the same set of rules “so that firms compete on price and quality, not tricks and traps.” Obama’s signature marks a legislative push that has become increasingly aggressive since the 2008 financial crisis pummeled the US economy. Most of the new rules won’t take effect immediately, as regulators will take months to study the 2,300-page law, named after its main authors, Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass., before drafting rules.