UK Only Article:
Winning the battle, losing the war
Regulators worry that the asset-management industry may spawn the next financial crisis
FINANCIAL crises may seem a familiar part of the economic cycle, but they rarely repeat themselves exactly. In the 1980s the locus was Latin America; in the late 1990s, Russia and South-East Asia; in 2007-08, American housing and banks. Now, some worry that the next crisis could occur in the asset-management industry.
The industry manages $87 trillion, making it three-quarters the size of banks; the biggest fund manager, BlackRock, runs $4.4 trillion of assets, more than any bank has on its balance-sheet. After the crisis, regulators tightened the rules on banks, insisting that they hold more capital and have sufficient liquidity to cope with short-term pressures. But that may be a case of generals fighting the last battle. In the absence of lending from banks, many …
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