The Group of 20 economies’ (G20) regulatory task force, the Financial Stability Board (FSB), said the industry had called for a more detailed analysis of systemic risks for determining which institutions should come under the new rules.
For finance companies and broker-dealers, the FSB has proposed a threshold of $100 billion in balance sheet total assets. Private funds, such as hedge funds and private equity funds, would come under the net if they have gross notional exposures of $400 billion or more.
The initial consultation set a simple size threshold of $100 billion of assets under management, above which the funds would come under the new rules.
This time round, the FSB, in conjunction with the International Organisation of Securities Commissions (IOSCO), a global securities watchdog, has proposed a new twin approach to cover traditional funds and their managers, rather than just the funds themselves.
Funds with $30 billion in net asset value or $200 billion in gross assets under management would come under the net. For asset managers, the FSB is seeking feedback on whether there should be a particular monetary value as a threshold for including them.
Having twin “methodologies” allows for one or several funds but not the actual manager to be deemed systemically important. Conversely, an asset manager could come under the net but not the fund being managed.
The FSB said it is considering excluding sovereign wealth funds, public financial institutions, and pension funds from the new rules.
“The revised proposal marks an important step towards addressing any too-big-to-fail problems amongst entities that are neither banks nor insurers,” FSB Chairman Mark Carney, who is also governor of the Bank of England, said in a statement.
“These include finance companies, market intermediaries, investment funds and asset managers.”
The FSB said once the criteria has been finalised by the end of this year, it will draw up a list of the non-banks that will face extra, yet-to-be-determined supervisory measures.
The FSB has already approved new rules for supervising the world’s top 30 banks and 9 insurers, which include holding more capital in some cases.
The first consultation on criteria for identifying big non-banks identified 14 big funds, all in the United States and none in Europe.
(Reporting by Huw Jones; Editing by Carolyn Cohn/Mark Heinrich)