WASHINGTON – On
Monday, May 19, the Financial Stability Oversight Council (Council) hosted a
conference on the asset management industry and its activities to help inform
the Council’s ongoing assessment of potential risks to U.S. financial
stability. During the conference, practitioners – including CEOs, treasurers,
and risk officers – as well as academics and other stakeholders discussed a
variety of specific issues that relate to the industry.
Opening the conference, Treasury’s
Under Secretary for Domestic Finance Mary Miller noted that the Council was
established to “bring regulators from across the financial system together to
collectively identify, monitor, and respond to potential threats to financial
stability.” She went on to note that Council members did not “come to today’s
conversation with any predetermined outcome.”
Under Secretary Miller emphasized
that if the Council identifies risks to financial stability posed by asset
managers or their activities, it has a number of policy responses. She said:
“the Council’s authorities include highlighting potential emerging threats in
its annual reports to Congress, making recommendations to existing primary
regulators to apply heightened standards and safeguards, and designating
individual firms on a company-specific basis. If we identify risks that require
action, we will seek to deploy the most appropriate remedy.” However, “it is
possible that at the end of this comprehensive review, the Council may choose
to take no action.”
Following her remarks, and before
moving on to the panels, Norm Champ, the Director of the Division of Investment
Management at the Securities and Exchange Commission (SEC), gave an overview of
the asset management industry. The SEC’s presentation is available here.
The conference then moved on to the
panels, each of which was moderated by a senior official of a Council member
agency. The first panel, which was moderated by John Worth, Chief Economist,
National Credit Union Administration, provided a discussion of investment
activities and risk management practices within the asset management industry.
The panelists were Kent Daniel, Professor of Finance, Columbia Business School;
William De Leon, Global Head of Portfolio Risk Management, PIMCO; Itay
Goldstein, Joel S. Ehrenkranz Family Professor, Professor of Finance, The
Wharton School of the University of Pennsylvania; Michael Mendelson, Portfolio
Manager, Risk Parity Strategies, AQR; and John Rogers, President and CEO, CFA
Institute; Member, Systemic Risk Council.
The second panel focused on
industry characteristics and the interaction of asset management activities
with the broader financial system, and was moderated by Nellie Liang, Director
of the Office of Financial Stability Policy and Research at the Board of
Governors of the Federal Reserve System. The panelists were Sarah Breeden, Head
of Market Sectors and Interlinkages Division, Financial Stability, Bank of
England; Ken Griffin, CEO, Citadel; Barbara Novick, Vice Chairman, BlackRock;
David Scharfstein, Edmund Cogswell Converse Professor of Finance and Banking,
Harvard Business School; and Kim Schoenholtz, Professor of Management Practice,
New York University Stern School of Business.
Finally, the third panel discussed
key operational functions and what obstacles, if any, exist to resolving a
failing manager or fund in a rapid and orderly manner, and was led by Lawranne
Steward, Senior Counsel of the Commodity Futures Trading Commission. The
panelists were John Gidman, Chief Information Officer, Loomis, Sayles &
Company; Alan Greene, Executive Vice President, U.S. Investor Services, State
Street Corporation; Andrew Metrick, Deputy Dean & Michael H. Jordan Professor
of Finance and Management, Yale School of Management; Philip Prince, Treasurer,
Pine River Capital; and Peter Stahl, Associate General Counsel, Fidelity
To read Under Secretary Miller’s
full remarks, see here: http://www.treasury.gov/press-center/press-releases/Pages/jl2404.aspx.
Today’s conference was webcast
live, and will be archived at the following: www.treasury.gov/press-center/Video-Audio-Webcasts/Pages/Webcasts.aspx.
For additional information on the
Council, please visit www.fsoc.gov.
For information about each member agency, please follow the links below.
of Governors of the Federal Reserve System
Futures Trading Commission
Financial Protection Bureau
Deposit Insurance Corporation
Housing Finance Agency
Credit Union Administration
of the Comptroller of the Currency
and Exchange Commission