By Andrew Ackerman and Victoria McGrane
WASHINGTON--A panel of top financial industry overseers is
considering a move away from labeling individual asset managers as
systemically important and requiring more oversight, according to
people familiar with the matter, a potential victory for the
industry that pushed back against the designations.
The Financial Stability Oversight Council on Thursday is
expected to discuss whether to refocus its review of the
asset-management industry to examine specific activities for
systemic risks, these people said.
The oversight council for months has focused on whether two
large asset managers, BlackRock Inc. and Fidelity Investments, are
"systemically important" and should be drawn in for oversight by
the Federal Reserve. Asset managers oppose such moves, arguing
individual firms don't pose risks to the system as banks might.
The Dodd-Frank laws says the Federal Reserve must prescribe
tougher rules on capital, liquidity and other operational areas for
nonbank firms designated as "systemically important."
Rather than designate individual companies for an additional
layer of regulation, the new approach could lead the oversight
council to direct such front-line regulators as the Securities and
Exchange Commission to address specific risky activities.
Already the oversight council has pressured the SEC to address
unresolved risks posed by the money-market mutual-fund industry,
and the SEC completed new rules for that space last week. The SEC
is currently the primary regulator for asset managers.
Since last fall, when the Treasury Department's Office of
Financial Research released a report on asset managers, the
industry and its allies on Capitol Hill have criticized the
Financial Stability Oversight Council's process for reviewing the
industry's top players.
At a May 19 public conference convened by the oversight council,
there was a broad consensus among academics and industry officials
that regulators should focus more on examining the risks of asset
managers' activities rather than designating individual firms as
systemically important. BlackRock has also long advocated that
approach.
Treasury has stressed in public comments that oversight council
officials didn't start the review with their minds made up to
designate asset managers.
"Indeed, it is possible that at the end of this comprehensive
review, the council may choose to take no action," Mary Miller,
Treasury's undersecretary for domestic finance, said at the May 19
event.
She added that if the oversight council does find that asset
managers or their activities "pose a threat to financial
stability," it has more than one policy option, including
recommending further regulation by firms' primary regulators.
"If we identify risks that require action, we will seek to
deploy the most appropriate remedy," she said.
A Treasury spokeswoman declined to comment.
The shift in focus was first reported by the Financial
Times.
Write to Andrew Ackerman at andrew.ackerman@wsj.com and Victoria
McGrane at victoria.mcgrane@wsj.com
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