Pascal Blanqé, Chief Investment Officer and Deputy Chief Executive of Amundi, the asset management firm owned by Crédit Agricole, has expressed concerns that the liquidity drought in the global bond markets could actually spark the "next crisis". Mr Blanqé outlined the likelihood of asset managers having to accept increased monitoring as a consequence, stating that there has been "a market structure change which includes potentially systematic considerations".
Mr Blanqé emphasised the need for bank managers to be aware of the changing climate within the marketplace, to ensure that appropriate regulations are developed from the outset.
Over the past few years, banks have had to draw in their trading arms, finding themselves under pressure from both a commercial and capital perspective. As such, investors have found their efforts increasingly hampered, finding it less straight forward to trade bonds and other securities. At the same time, money has flowed into bond funds from retail investors hit by two global stock market crashes in the space of ten years and this has amplified the need for big money management groups.
Big asset managers have given investors the ability to take their money out on a daily basis should they wish to. Now some regulators are warning that this is an ever increasing risk to the financial system.
As a result, the Financial Stability Board in Basel may upgrade the importance of this issue and require some of the biggest asset managers to undergo further regulatory scrutiny. The International Monetary Fund (IMF) has already expressed its support for more regular stress tests in light of the current rulebook not being "set up to fully address risk, neither at the institutional nor systemic level".
However much of the industry has rallied against these moves. Iosco, the global securities regulator, has underlined the need for understanding dangers posed by the sector as a whole rather than worrying about individual, large asset managers. Many managers have increased their in-house monitoring as a result, aiming to mitigate the impact of any inbound increase in regulations.