Fund Management and Systemic Risk – Lessons from the Global Financial Crisis

Elias Bengtsson

Financial Markets, Institutions & Instruments, 2014, vol. 23, issue 2, 101-124

Abstract: Fund managers play an important role in increasing efficiency and stability in financial markets. But research also indicates that fund management in certain circumstances may contribute to the buildup of systemic risk and severity of financial crises. The global financial crisis provided a number of new experiences on the contribution of fund managers to systemic risk. In this article, we focus on these lessons from the crisis. We distinguish between three sources of systemic risk in the financial system that may arise from fund management: insufficient credit risk transfer to fund managers; runs on funds that cause sudden reductions in funding to banks and other financial entities; and contagion through business ties between fund managers and their sponsors. Our discussion relates to the current intense debate on the role the so‐called shadow banking system played in the global financial crisis. Several regulatory initiatives have been launched or suggested to reduce the systemic risk arising from non‐bank financial entities, and we briefly discuss the likely impact of these on the sources of systemic risk outlined in the article.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/fmii.12016

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:finmar:v:23:y:2014:i:2:p:101-124

Access Statistics for this article

More articles in Financial Markets, Institutions & Instruments from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().