In a May 29, 2014 white paper, Blackrock responded strongly to the Financial Stability Oversight Council’s (FSOC) 2014 Annual Report that raised concerns about asset managers and securities lending. In particular, Blackrock’s paper takes issue with FSOC’s assertion that indemnity provided to lending clients by asset managers acting as securities lending agents created extra risk because asset managers do not face the same capital and liquidity requirements as their bank counterparts. In response, Blackrock said that, “borrower default indemnification is an established practice in securities lending, provided by the majority of lending agents to a variety of clients.” Further, because all securities loans are fully collateralized, lending agents’ exposure for borrower default indemnification is quite limited.

“Clearing agencies that have been designated as systemically important or that clear security-based swaps are a backbone of the U.S. financial markets. The enhanced regulatory regime proposed today reflects the importance of effective regulation of these entities.” 

---SEC Chairman Mary Jo White 

The Securities and Exchange Commission voted on March 12 to propose new rules to enhance the oversight of clearing agencies that are deemed to be systemically important or that are involved in complex transactions like security-based swaps. The Dodd-Frank Act calls for a new framework of regulation for certain clearing agencies, and these rules, if adopted, would apply to SEC-registered clearing agencies that have been designated as systemically important by the FSOC. The rules would also sweep into their regulatory ambit clearing agencies not deemed systemically important, but that take part in highly complex transactions, such as clearing security-based swaps.