FSOC issues update on potential systemic risks in asset management

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On April 18, 2016, the Financial Stability Oversight Council (FSOC or the Council) issued an update1 on its review of potential systemic risks arising from asset management products and activities.

The FSOC’s review—including its December 2014 notice seeking public comment on asset management-related issues—has focused on five areas:  liquidity and redemption, leverage, operational risk, securities lending, and resolvability and transition planning.

In conducting its analysis, the FSOC utilized publicly available data, confidential data reported on the Securities and Exchange Commission’s (SEC) Form PF, input from member agencies with supervisory authority, academic studies, and submissions in response to the request for public comment.

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Heightened Risk Requirements: OCC Defines “Strong,” Now Banks Must Get There

On September 2, 2014, the Office of the Comptroller of the Currency (OCC) finalized new standards that formalize “heightened expectations” for risk governance on the banks over $50 billion it regulates — and in turn, impose new levels of responsibility on the board and executive leaderships of those institutions for the risk decisions they make.

Now, banks must codify “strong risk management practices” at the bank legal entity level, including governance policies, procedures, structures and even board composition. What some banks have had to do as the result of individually targeted Matters Requiring Attention (MRAs) is now applicable to all, albeit on a phased basis according to size. All banks with more than $50 billion in assets must comply with the new rules within 18 months. Those whose assets total between $100 billion and $750 billion have six months and those with more than $750 billion must comply within two.

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