The Committee on Capital Markets Regulation today submitted a letter to the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) on assessment methodologies for identifying non-bank non-insurer global systemically important financial institutions (G-SIFIs).
The Committee’s letter lays out three main concerns. First, that asset managers, including managers of registered investment companies and managers of private funds, do not pose systemic risk because their bankruptcy would not set off a chain reaction of financial institution failures. The Committee generally oppose designating these NBNIs as systemically important. Second, the Committee’s analysis finds that the only asset managers affected by the Consultation are U.S. firms. The Committee does not believe that the FSB is an appropriate forum for determining regulatory policies that will affect a single country. Third, the Committee is concerned that the Consultation uses derivatives gross notional exposure when measuring the size of an investment fund during Stage 0 screening. Notional values are not an accurate measure of risk or size.
The full text of the letter may be viewed as as PDF here.