On January 12, the Financial Stability Board (FSB) published its policy recommendations (Recommendations) to address risks to global financial stability from structural vulnerabilities associated with asset management activities. The FSB consulted on its proposed recommendations in June 2016, and the FSB has incorporated responses to the consultation addressing specific structural vulnerabilities into the Recommendations. The document sets out 14 final policy recommendations to address the following structural vulnerabilities from asset management activities that could potentially present financial stability risks: (1) liquidity mismatch between fund investments and redemption terms and conditions for open-ended fund units; (2) leverage within investment funds; (3) the operational risks and challenges of asset managers in stressed conditions; and (4) securities lending activities of asset managers and funds.

The FSB states that some of the Recommendations will be operationalized by the International Organization of Securities Commissions (IOSCO). IOSCO is expected to finish its work on liquidity recommendations by the end of 2017, as well as its work on leverage measures before the end of 2018.

The Recommendations are available here.