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Risk Snapshots – 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.

GBI_RiskSnapshots_3.1_FRMssupport

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
    and 71% favor it for family offices
FBI_RiskSnapshots_3.2_FamilyOffices

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
GBI_RiskSnapshots_3.3_PrimeBrokers

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
GBI_RiskSnapshots_3.4_TensionExists

TENSION EXISTS AT FIRMS
BETWEEN BUSINESS LINES
AND RISK MANAGEMENT

 

  • Nearly 40% 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.

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