On June 22, 2016, the Financial Stability Board (FSB) published for public consultation Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities. The document sets out 14 proposed policy recommendations to address the following structural vulnerabilities from asset management activities that could potentially present financial stability risks:
- Liquidity mismatch between fund investments and redemption terms and conditions for fund units;
- Leverage within investment funds;
- Operational risk and challenges in transferring investment mandates in stressed conditions; and
- Securities lending activities of asset managers and funds.
The key recommendations for liquidity mismatch and leverage focus on both public and private funds.
The FSB reported that it “intends to finali[z]e the policy recommendations by the end of 2016, some of which will be operationalized by the International Organization of Securities Commissions (IOSCO).”