Asset Management Industry Still a Source of Worry
In a
January 30, 2015 address, Federal Reserve Board Governor Daniel K. Tarullo once again voiced the Fed's concerns about the systemic risk posed by potential firesales in the asset management industry. Tarullo indicated that as r
egulators implement reforms under the Basel and FSB proposals and frameworks, they should take into account the “system-wide demands on liquidity during stress periods and correlated risks among asset managers that could exacerbate liquidity, redemption and fire-sale pressures."
In his address, Mr. Tarullo noted the rapid growth of the asset management industry since the financial crisis, both in terms of the dollar amount of assets under management and in the concentration of assets managed by the largest firms. As stricter prudential regulation makes investment in certain forms of assets more costly for banks, this growth is expected to continue apace.