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Leverage caps could reduce risk, says BIS 

June 29, 2015

Richard Gluyas, The Australian

The central bankers’ club has floated the idea of caps on leverage for asset management ­companies and restrictions on shifts in their investment port­folios to counter new risks in the financial system from the explosive growth in the $US75 trillion ($98 trillion) ­industry.

The Bank for International Settlements, which has 60 member central banks that account for 95 per cent of global GDP, said in its 2015 annual report the global hunt for yield had resulted in ­regulated banks losing ground as financial intermediaries to mut­ual, private equity and hedge funds, which had mushroomed in size from $US35 trillion in 2002 to $US75 trillion in 2013.

“As a result, new types of risk have gained prominence,” said the report, released over the weekend in Switzerland.

As risk-taking migrated away from the banking sector, asset managers and their investment consultants were playing an increasingly significant role, with a lot of weight attached to the performance of various asset classes.

Read more: The Australian

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