By Huw Jones
LONDON (Reuters) – There are no “pre-determined” decisions on how to strengthen resilience of investment funds in light of coronavirus stresses seen in March, an industry conference was told on Tuesday.
Regulators are studying potential reforms as soon as next year of money market funds, open-ended funds and leveraged hedge funds, prompting industry warnings about hasty changes not based on data.
Reforms are likely to focus on bolstering liquidity buffers at funds, rather than replicating banking rules that mandate capital cushions.
G20 financial regulators said last week that without huge central bank intervention, some funds would have suffered far more during market volatility when economies went into lockdowns to fight the pandemic.
“There are some very serious projects being launched now globally, there are no pre-determined policy outcomes,” Ashley Alder, chair of IOSCO, a global umbrella body for securities regulators, told an Investment Association online conference.
The general mantra is to look where there may be sub-optimal resilience and what was needed to avoid a repeat of central bank intervention in the next crisis and there are no answers yet, Alder said.
“It is a balance and it is around aspects of resilience and levels of resilience that are sensible,” Alder added.
In the past, securities regulators and central banks have disagreed over how to regulate funds, but Alder said there has now been a “sea change” in cooperation between them.
The funds sector, part of what has been dubbed ‘shadow banking’, has grown hugely since the last financial crisis a decade ago, drawing closer regulatory scrutiny.
“We are no longer in the shadows. I think as an industry we need to … be more thoughtful about the way we positively engage with the creation of the policy agenda,” Investment Association Chair Keith Skeoch said.
The work by regulators on funds was a “huge opportunity to get good data driven analysis on the table”, Alder said.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.