Systemic Risk Information
Understanding and managing systemic risk will be a key challenge for both regulators and financial firms. Systemic risks – those risks which are not just a danger to single firms but which threaten the integrity of the broader market – require special attention. Monitoring and managing these risks is critically important in ensuring that our capital markets are a safe and reliable vehicle to drive growth in the broader economy. Regulators and legislators have recognized the importance of this issue, and we at SIFMA support the development of an effective systemic risk regulatory regime. To support this process, we are proud to introduce our Systemic Risk Information Study, produced together with Deloitte & Touche.
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Introduction
Understanding and managing systemic risk will be a key challenge for both regulators and financial firms. Systemic risks – those risks which are not just a danger to single firms but which threaten the integrity of the broader market – require special attention. Monitoring and managing these risks is critically important in ensuring that our capital markets are a safe and reliable vehicle to drive growth in the broader economy. Regulators and legislators have recognized the importance of this issue, and we at SIFMA support the development of an effective systemic risk regulatory regime. To support this process, we are proud to introduce our Systemic Risk Information Study, produced together with Deloitte & Touche.
We hope this study will provide useful guidance on how new policies on monitoring systemic risk can be effectively implemented. There have been extensive debate in the academic, policy, and legislative communities on advantages of a range of regulatory structures. Regardless of the structure of new regulation, its effectiveness will be driven in no small part by the specific ways that information is tracked, shared, analyzed, and reported.
Monitoring systemic risk is not just an extension of reporting for compliance or enforcement purposes – looking beyond the actions of individual firms to the stability of the broader market will require asking different questions and looking at information in new ways. I believe this study provides valuable insights on how regulators can develop an accurate and insightful understanding of systemic risk issues in financial markets and market participants.
The financial services industry is also thinking about systemic risk in new ways, and this study incorporates the insights and experiences of risk managers, operations leaders, and treasurers from among our member firms. It draws on their experiences as they have managed through a range of systemic events. It incorporates their front-line perspective on what types of information were most effective in a range of situations, how they currently manage systemic risk information, and their perspectives on what regulators should focus on.
SIFMA’s members – broker-dealers and asset managers nation-wide – want to be an effective partner to the regulatory community as it works to expand its understanding and monitoring of systemic risk. Both regulators and financial services firms need to have the information and tools to understand risks developing within the system and use those insights to manage, control, and mitigate risk. This report brings together the perspectives of these parties on how this can be done in hopes it will be both a useful resource and the start of a more in-depth conversation on this critical topic. We thank you for your interest in this report and hope you find it to be a thought-provoking and valuable tool for future discussions.