European Union (EU) regulators are assessing the potential threat to the financial system that a run on fixed-income funds could pose when central banks change course on monetary policy.
The size of the asset management industry has "raised issues about what happens in the case of a reversal in interest rates" that prompts investors to pull out their money, said Steven Maijoor, head of the European Securities and Markets Authority (ESMA). Regulators "need to look seriously into this issue, collect the evidence, and understand as well as possible the risks," he said.
"Redemptions played a role in the financial crisis," Maijoor said in an April 24 interview in Riga, Latvia. "Asset managers coped quite well with the reversals in the values at that time, but there's no guarantee of that in the future."
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