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Rating:What Did You Do To Make the Treasury So Mad? Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, October 01, 2013

What Did You Do To Make the Treasury So Mad?

News summary by MFWire's editors

Let the judging begin.

At any rate, the The US Treasury’s Office of Financial Research published a report on Monday detailing the ways in which the industry could generate risk in the financial system, according to Reuters and FT, and Bloomberg.

The data in this report, according to the news outlets, will be used by the Financial Stability Oversight Council (FSOC) to decide which asset managers get the dreaded Systematically Important Financial Institution, which translates into tougher scrutiny on such things as risk-based capital, leverage and liquidity.

The study outlines a number of factors that could lead to a bad housekeeping seal of finance, including use of leverage, dependence on borrowing, and the tendency of "herding" -- essentially when managers act like lemmings in bad times.

"A certain combination of fund and firm level activities within a large, complex firm or engagement by a significant number of asset managers in riskier activities could pose, amplify or transmit a threat to the financial system," Reuters quotes the report as declaring.

"These threats may be particularly acute when a small number of firms dominate a particular activity or fund offering," the report continues.

The report doesn't point any fingers on any specific firms per se for wrongdoing, according to both news outlets.

Nonetheless, both news outlets report that the study does at least mention in passing the three asset giants, among others: Vanguard, Fidelity, and BlackRock

Edited by: Tommy Fernandez


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