Don’t make us Sifis, BlackRock and Fidelity tell FSB

BlackRock and Fidelity have hit back at the Financial Stability Board’s moves to designate the big fund managers systemically important financial institutions.

  • By Steven Gilmore
  • 12 Oct 2014
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Senior figures at BlackRock and Fidelity have warned that designating asset managers as systemically important financial institutions (Sifis) would be “ineffective at best” and criticised regulators’ fundamental approach to systemic risk in the industry.

Asset management holdings have become increasingly concentrated in a small number of large managers, with the top 10 accounting for $19tr in assets under management, according to the IMF’s latest global financial stability report. The Financial Stability Board (FSB) — a body that co-ordinates financial regulations at the international level — earlier this year suggested that certain asset managers could be designated systemically important financial institutions (Sifi), which is likely to come with more onerous regulations.

“The Sifi designation is simply not justified and would be ineffective at best,” said Peter Stahl, deputy general counsel for Fidelity Investments, adding that increased costs were one of the intentions of the Sifi regime. “In a market where fees are measure in single basis points, we know what the effects would be.”

The FSB is designing a methodology for assessing how an asset manager might pose systemic risk — including what would happen if an asset manager failed, said William Murden at the US Treasury’s office of international banking and securities markets and part of a Financial Stability Board working group on the issue of systemic risk.

“For most of our life as a working group we weren’t asked to look at policy measures but recently we’ve been asked to start,” he added. Murden wanted to dispel myths that in its hunt for systematic risk within the asset management business the FSB was focused only on the size of the manager, that it already had names in mind or that it had already passed judgment on whether the asset management business posed systematic risk.

Dispelling myths

Barbara Novick, vice-chairman of BlackRock, however, had her own myths to address. “Our concern is that there is still this concept that managers fail,” she said. “Managers do not fail. That’s not an issue. We want to figure out what systemic risks are there, but we need to take that off the list.”

The concentration of assets among the top managers and concentrated decision making within asset managers mean that large scale redemptions in one fund could lead to losses across unrelated asset classes, and magnify selling pressure across markets, according to the IMF report. But Novick suggested that redemptions at Pimco have provided a clear case study.

“We know from watching a large west coast manager over the last two weeks,” she said. “Billions of dollars have moved, most of it from two very specific funds, and there hasn’t been even a whimper in the market.”

The myth that if a manager experiences a reputational event it leads to asset sales that disrupt markets is just that, she said, a myth. Meanwhile, signalling out specific managers as systemically important would prompt either flows into those funds, or away from them — a precedent established by the SEC’s regulation of the largest money market funds, she added.

“If we regulate them differently investors will move their money,” she said. “So the money market rules apply across the board — whatever category of fund you fall into all funds are regulated the same. That’s how it should be.”

  • By Steven Gilmore
  • 12 Oct 2014

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 09 Jun 2017
1 Citi 206,449.53 755 8.84%
2 JPMorgan 192,919.68 823 8.26%
3 Bank of America Merrill Lynch 175,174.46 602 7.50%
4 Barclays 144,195.77 526 6.17%
5 Goldman Sachs 139,497.22 445 5.97%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 20 Jun 2017
1 Deutsche Bank 23,530.61 67 7.96%
2 HSBC 20,994.25 74 7.11%
3 Bank of America Merrill Lynch 20,490.14 49 6.93%
4 Credit Agricole CIB 15,076.29 72 5.10%
5 BNP Paribas 14,834.05 81 5.02%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 20 Jun 2017
1 JPMorgan 10,673.78 46 8.06%
2 Citi 9,632.20 60 7.28%
3 Goldman Sachs 9,310.79 46 7.03%
4 UBS 9,230.61 36 6.97%
5 Morgan Stanley 8,508.94 46 6.43%