Bank of England’s Andrew Haldane sounds alarm over giant funds
Runs on investments could pose systemic threat, says director of financial stability
Large investment funds could be “too big” and pose a systemic risk to the global financial system, one of the Bank of England’s most senior financial regulators has warned.
In a speech that is likely to electrify the fund-management industry, Andrew Haldane, the Bank’s executive director for financial stability, said regulating funds was “the next frontier for macro-prudential policy”.
Speaking at the London Business School’s Asset Management Conference, he pointed out that assets under management were projected to rise from $87 trillion (£52 trillion) currently to $400 trillion by the middle of the century.
“These trends potentially have implications for financial markets dynamics and systemic risk – for example greater illiquidity risk, correlated price movements and susceptibility to runs,” he said. “Their size means that distress at an asset manager could aggravate frictions in financial markets, for example through forced asset fire-sales”.
The intervention comes at a time when the fund-management industry is resisting attempts by the Financial Stability Board, the G20’s global regulator, to designate funds with over $100 billion under management as systemically important.
Enormous global banks took excessive risks in the credit boom of the last decade resulting in the world financial crisis.
They had to be rescued by governments because the consequences of allowing them to collapse would have been even worse, giving rise to the description of them as “too big to fail”. But this is the first time a senior regulator has suggested that large mutual and investment funds could pose a similar danger.
Haldane accepted that the risks posed by funds were different to those of banks because funds do not generally use leverage and are therefore at less risk of sudden insolvency. But he insisted this did not mean regulators could afford to ignore their size and activities.
Last month the Bank of England announced that Mr Haldane will be moving from his financial stability brief to become Threadneedle Street’s chief economist. In that capacity he will sit on the Bank’s rate-setting Monetary Policy Committee.
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...