By Huw Jones
LONDON (Reuters) - The world's umbrella body for market regulators will launch an immediate full review of potential risks from asset management activities and products, throwing into doubt planned new global rules for top funds.
The International Organization of Securities Commissions (IOSCO) said its board had concluded that a full review was needed with an immediate focus on identifying potential systemic risks.
The global Financial Stability Board (FSB), chaired by Bank of England Governor Mark Carney, is due to publish final rules for regulating so-called systemically-important asset managers by the end of this year.
The plans have been fiercely criticised by the industry for earmarking funds simply because of their size.
IOSCO intervened on Wednesday, saying its review will check if funds and their products are systemic in the first place, before it would continue working with the FSB to finalise the global rules.
Such a late hour move will cheer the sector and raise doubts that the FSB rules can be completed on time or at all.
Richard Metcalfe, director of regulatory affairs at Britain's Investment Association trade body, said he sympathised with IOSCO's comments.
"We continue to believe that it is possible to identify which risks genuinely matter to the system and which do not," Metcalfe said.
Market regulators have long criticised the FSB privately for being top heavy with central bankers who view regulation in terms of capital charges.
"We see our role as helping markets do their job," IOSCO Chairman Greg Medcraft told a press conference on the sidelines of IOSCO's annual conference in London.
"We don't regulate markets like we regulate banks."
Securities regulators sense the wind in their sails as the focus of policymakers shifts from a cracking down on banks to lifting growth with markets seen as the key to raising funds for the economy.
Medcraft said market regulators have real life experience of how funds have coped with crises, which was finally being acknowledge by the FSB, of which IOSCO is a member.
It has been a "good lesson for everybody" that the FSB has now allowed IOSCO to bring in market regulators to head working groups, Medcraft said.
Medcraft, who spoke with Carney on Wednesday morning, said the IOSCO review would feed into the FSB's final rules though he questioned the need for new regulation in this area.
"The tools we have actually worked in prior crises. We have real life examples," Medcraft said.