(Jul 14) The Financial Stability Board has decided not to categorize certain fund managers as "systemically important" and will instead focus on market activities to identify possible risks. The FSB may still impose new rules on fund managers to protect the market. Fund managers may be asked to hold liquidity buffers and provide ways to better prepare for investor withdrawal during times of market volatility. The FSB, headed by Bank of England Governor Mark Carney, and the International Organization of Securities Commissions are studying the impact on financial stability of asset-management activities globally. "We will address issues around activities first, and then take an assessment if there's any residual risk that merits any action because an asset-management activity is part of a bigger asset-management group," Carney said.

(Jul 14) So-called shadow lenders -- asset managers that operate outside the banking industry's regulatory oversight -- have been making an increasing number of leveraged loans to midsize businesses. Their expanding role in the U.S. economy, hailed by some regulators, has been made possible by tighter lending restrictions imposed on banks. "It stands to reason that more activities may migrate outside the perimeter of regulated institutions," Daniel Tarullo, the Fed governor in charge of bank oversight, said on June 25, adding that "much of the activity" will be "very healthy." Mayra Rodriguez Valladares, managing principal at MRV Associates in New York, a consultant to both regulators and banks, said she's concerned that lending has been "moving to the shadows" in the U.S., Europe and China, and that regulators lack authority or have largely ignored the growing threat that might pose. "Regulators need to write rules to regulate the shadows," she said. "The focus has been too much on banks. Bear Stearns and AIG were not banks."