Avoid Bank-Like Systemic Risk Rules by Advocating for Activities-Based Systemic Risk Regulation and Risk-Based Assessments of Leverage

MFA has called on the Financial Stability Oversight Council (FSOC) and policymakers in the U.S. and the EU to maintain a capital markets-based regulatory framework with respect to asset managers and avoid imposing bank-like systemic risk reporting rules on non-bank entities and activities. MFA has also advocated that regulation of systemic risk is best accomplished through activities-based regulation of markets and market participants, done on a holistic basis, after regulators analyze existing and pending regulations to determine if regulatory gaps remain.

As policymakers continue to consider how best to measure and analyze investment funds’ use of leverage, MFA recommends policymakers should analyze leverage within a broader risk framework. That framework also should consider other risk factors and mitigants, including market practices and regulations that reduce the likelihood that the use of leverage by a hedge fund might create systemic risk.