Skip to main content

Newsroom

March 6, 2014

Risk is greatest when there is no perception of risk

“Should the biggest fund management groups be regulated as systemically important financial groups, in the same way as the biggest global banks? The US Treasury’s Office of Financial Research has asked this question, and is inclined to answer “yes”. The fund management industry disagrees.”

“The question is central to the attempt to engineer a financial system, post-Lehman, that is fit for purpose. It is also very hard.”
 

“Let us start with a clear distinction. Regulated fund managers are agents. They invest other people’s money, and create funds as separate legal entities from the companies that manage them. And – in the regulated space at least – they do not borrow against the assets they hold in their funds. In each of these respects, they differ from universal banks that have leverage, and invest their own money.”

“A big bank can create systemic risk by borrowing too much, and then suffering enough losses on its loans to wipe out its capital. At that point, it inflicts losses on all those who have lent to it and – if the bank is as big as Lehman Brothers was – a systemic financial crisis can ensue.”

***

Read full Financial Times article here.

In the News
Share

MEDIA REQUESTS

For media inquiries, please contact us at
press@bettermarkets.org or 202-618-6433.

Contact Us

For media inquiries, please contact press@bettermarkets.org or 202-618-6433.

To sign up for our email newsletter, please visit this page.

Name(Required)
This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact press@bettermarkets.org or 202-618-6433.

Donate

Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today