ECB’s Makhlouf: Growing Role of Funds Calls for Early Risk Mitigation

20 May 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Monday said that it was necessary to anticipate the risks arising from the increasing participation of funds in financial intermediation.

Speaking at the Conference on Macroprudential Policy for Investment Funds at the Central Bank of Ireland, which he heads, Makhlouf said, according to a text provided, ‘[A]s the funds sector becomes more integral to the wider functioning of several key financial markets, the regulatory framework needs, in turn, to evolve in order to be better able to mitigate system risk.’

When addressing financial risks, it was important to act ex ante, ‘before concerns become significant problems’, he said.

The operationalisation of a macroprudential framework for funds would be more challenging and take longer to be completed than the one for banks, since the business models and activities of the former were diverse, he said.

‘This [framework] could be achieved through repurposing existing regulatory provisions and tools, or it could also entail the potential development of new tools specifically aimed at reducing the systemic risks posed by cohorts of the funds sector’, he said.