LONDON - Britain’s market watchdog is resisting calls for stricter rules on investment funds, putting the regulator at odds with the Bank of England which wants tighter controls to prevent them becoming a source of contagion in financial markets.
Britain’s commercial property funds, for example, had to stop investors asking for their money back on a daily basis when extreme market volatility hit in March after economies entered lockdown. But Britain’s Financial Conduct Authority does not want to rush to impose tighter rules because investment funds can be an important source of cash for companies coping with the crisis.
The tension between central banks and securities watchdogs over regulating funds is not new, having surfaced in 2015 when the International Organization of Securities Commissions torpedoed an attempt by the Financial Stability Board to impose bank-like rules on big asset managers. March market volatility pointed to problems in the commercial paper market - used for short-term financing - rather than with the money market funds themselves, the source added.