Exclusive: Funds could face market curbs after lobbying backfires

Wed Aug 20, 2014 6:26pm EDT
 
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By Huw Jones

LONDON (Reuters) - Fund managers may face tougher scrutiny by global regulators than planned after their intense lobbying against a first proposal backfired, industry sources and G20 officials said.

A global G20 task force is rethinking its initial approach which involved targeting the biggest funds, and could opt for a more intrusive method that would affect more funds by limiting their market activities during periods of turbulence, the sources told Reuters.

The plans are part of an international effort to prevent financial crises.

"The industry fears it may have shot itself in the foot as FSB (the regulatory task force) is coming back with an even more radical proposal," a European asset management industry source said.

"Since we argued that size is the wrong metric to use, the FSB is now looking at investment-driven supervisory tools."

The group of 20 economies (G20) in 2009 asked its regulatory task force, the Financial Stability Board (FSB), to scrutinize big asset managers more closely as part of its remit to maintain financial stability. Until then, the focus had been on banks.

World leaders wanted supervision of all parts of the financial system reviewed after the 2007-09 financial crisis resulted in taxpayers having to bail out many banks, at a cost of trillions of dollars.

The FSB proposed in January that individual funds with over $100 billion in assets should face tougher, yet-to-be-detailed scrutiny. This threshold captures 14 funds, all in the United States.   Continued...