U.K. asset managers seem too optimistic about their available liquidity, says Bank of England Governor Mark Carney.
In a survey of 135 asset managers, the English central bank found a “wide range in terms of the apparent quality of liquidity management,” reports Bloomberg. Asset managers, as well as banks, have been targeted for “stress tests” to make sure they can handle another financial crisis. The surveyed managers seemed confident they would be able to sell securities in the case of a “stress event,” but Carney says they may be overestimating their abilities, calling it an “illusion of liquidity.” Metrics used for measuring liquidity may show managers in a safe zone of liquidity, but that liquidity isn’t usually long lasting.
The asset management industry is booming in the post-crisis world, raising concerns that changes to interest rates could rock the markets hard, hitting the managers. But asset managers have pushed back against further oversight, saying they invest other people’s money, so they aren’t likely to cause problems.
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