Risk Managers Call for More Regulation on Prime Brokers, Family Offices
A new GARP survey of Financial Risk Managers (FRM®) reveals support for increasing regulatory requirements on prime brokers and family offices. These results come in the wake of the Archegos Capital Management meltdown, which set off a chain reaction in the markets that led to more than USD 10 billion in total losses for global banks.
FRMS SUPPORT GREATER REGULATION OF PRIME BROKERS AND FAMILY OFFICES
Overall,71%of risk managers say that prime brokers need to be regulated more strongly;65%believe family offices should be regulated more strongly
Among those in firms with prime brokers,76%of those respondents support more regulation for prime brokers and71%favor it for family offices
FAMILY OFFICES SHOULD FILE COMPREHENSIVE REPORTS
78%of risk managers feel family offices — similar to Archegos Capital, which managed the fortune of former hedge fund manager Bill Hwang — should be required to file reports similar to those that hedge funds in the U.S. submit to the SEC
84%say such reports would help prime brokers evaluate risks posed by clients
PRIME BROKERS SHOULD REPORT ALL EXPOSURES
79%of all respondents say that prime brokers should be required to report all exposures to regulators
74%of respondents at firms with prime brokers agree that prime brokers should be required to report all exposures to regulators
TENSION EXISTS AT FIRMS BETWEEN BUSINESS LINES AND RISK MANAGEMENT
Nearly40%of risk managers say tension between business lines and risk management ranges from “meaningful” to “extreme” at firms regarding limits and margin requirements around prime broker positions
32%report “meaningful” to “extreme” tension around the speed of liquidation of client collateral when they violate margin requirements
The GARP Risk Snapshot surveyed nearly 100 Financial Risk Managers (FRM®) from across the world in May 2021. To read about the study, click here.
