BlackRock, Fidelity face initial risk study by regulators
FIDELITY INVESTMENTS and BlackRock, two of the nation's largest asset managers, are being studied by the new Financial Stability Oversight Council to see if they must be designated as potential risks to the financial system and thus required to meet more stringent regulations.
BLOOMBERG FILE PHOTO/BRENT LEWIN
By Jesse Hamilton and Ian Katz Bloomberg News
WASHINGTON - BlackRock Inc. and Fidelity Investments will be studied by U.S. regulators who are in the early stages of reviewing whether asset managers pose a potential risk to the financial system, two people with knowledge of the matter said.
The Financial Stability Oversight Council’s discussion Oct. 31 and agreement to review New York-based BlackRock and Boston-based Fidelity don’t necessarily mean the companies will be designated systemically important by the council, according to the people, who requested anonymity because the meeting was closed to the public. The panel didn’t take any formal action regarding the companies.
FSOC’s preliminary talks may presage months of wrangling between the industry and officials charged with trying to prevent a repeat of the 2008 financial crisis. Asset managers are among non-bank financial companies that the council is empowered by law to evaluate to determine whether their failure could threaten the entire system and thus require Federal Reserve oversight. BlackRock, Fidelity and the mutual-fund industry’s trade group have said money managers aren’t a threat.
“We continue to believe that the asset-management industry, and mutual funds in particular, do not present the types of risk that the FSOC was designed to address,” Vincent Loporchio, a spokesman for Fidelity, said in an email in response to a question about the FSOC meeting. BlackRock spokesman Brian Beades said the company “doesn’t comment on rumor or speculation.”
Treasury Secretary Jacob J. Lew is the council’s chairman. Treasury spokeswoman Suzanne Elio declined to comment. In a statement after last week’s meeting, Elio said the council “held an initial discussion on asset management,” and she didn’t identify any companies. The FSOC’s rules state that it doesn’t intend to disclose names of firms before “a final determination.”
The oversight council is authorized under the Dodd-Frank Act of 2010 to identify companies that could threaten stability. The Fed can impose on those firms tighter capital, leverage and liquidity rules, and demand measures including stress testing for crisis scenarios and plans for winding them down should they start to fail. The council includes Fed Chairman Ben S. Bernanke and Securities and Exchange Commission Chairman Mary Jo White.