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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power