Large asset managers sometimes also provide insurance to their own investors through the form of an indemnification against any possible losses from the arrangements if the borrower doesn’t return the securities. As new regulations apply to banks, the FSB said asset-managers may play a larger role in the lending market which “could potentially result in a concentration of systemic risks outside the banking sector.”
The FSB said regulators need better data to oversee the lending and should look to also verify or confirm that asset-managers have resources to cover the losses. The industry has previously said regulators’ worries are overstated.