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Brave new world for U.S. financial stability council after MetLife 

May 4, 2016

Bora Yagiz, Reuters

The U.S. Financial Stability Oversight Council’s recent review of the asset management industry seemed a rather routine piece of regulatory work. But the review released last week comes in a charged atmosphere for the council because of a court decision that rescinded its designation of insurer MetLife as a systemically important financial institution, or SIFI.

The federal court’s decision on March 30 marked the first successful challenge to the authority of the council in SIFI designations, and could lead to more skeptical inspection of its reports.

The asset management review was relatively noncontroversial. It reaffirmed the importance of three key risk areas that the Securities and Exchange Commission has been acting for a year: liquidity and redemption risk, leverage, and companies’ reliance on service providers for data collection and reporting. The council duly recommended more robust risk management practices, clearer guidelines on funds’ limits on liquidity, and possible stress tests and transition planning exercises.

The process for that review, which was already in the works for a year, could be the last taken at face value. Read more

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