Yellen urged to steer global regulators from too-big-to-fail Tag

[WASHINGTON] Federal Reserve Chair Janet Yellen and other US officials should push global regulators away from designating individual asset managers and investment funds systemically important, the industry's lobby group said.

The Financial Stability Board, a group of international regulators that makes recommendations to the Group of 20 nations, plans to identify too-big-to-fail investment funds that could face stricter oversight. Asset managers including BlackRock Inc and Vanguard Group Inc argue that the FSB is focusing too much on size and say its proposal wouldn't reduce risk to the financial system.

US regulators should "use their authority and role within the FSB process to redirect it away from one that seems in a misbegotten way focused on designation of entities," Paul Schott Stevens, chief executive officer of the Investment Company Institute(ICI), said in an interview on Monday.

Global regulators should instead move "toward a much more promising direction, which is looking at activities and practices that go all the way across the asset-management sector," he said. The ICI, based in Washington, is the mutual fund industry's main lobbying group.

The Financial Stability Oversight Council, a group of US regulators led by Treasury Secretary Jacob J Lew, discussed in 2013 whether BlackRock Inc. and Fidelity Investments should be designated systemically important and subjected to Fed oversight. After an industry campaign against designation, the FSOC gradually shifted its approach to focus on products and activities.

FSB Influence Stevens, however, said he thinks the FSOC, under FSB influence, could change its focus again.

In a letter to Ms Yellen, Mr Lew and Securities and Exchange Commission Chair Mary Jo White dated May 28, Mr Stevens said the ICI is concerned that the FSB process "ultimately could be used to exert multilateral influence on the FSOC to expand the regulatory reach of the Federal Reserve itself to include US funds, managers and capital markets." Mr Stevens noted that Fed Governor Daniel Tarullo is playing a key role in the FSB's work on asset managers. Mr Tarullo is chairman of the FSB's Standing Committee on Supervisory and Regulatory Cooperation.

Fed spokesman Darren Gersh confirmed that the Fed had received Mr Stevens's letter.

BLOOMBERG