Recently, regulators including the New York Federal Reserve and the Financial Stability Oversight Council (FSOC) have expressed concerns that the securities lending operations of asset managers may pose major risks to the market and may need greater oversight especially in light of:

In May 2015, BlackRock Inc. published a white paper in which it asserts a lack of understanding on behalf of financial regulators regarding securities lending practices and associated risks is leading to an overstatement of its risks and dangers. In the white paper, BlackRock addresses many of these securities lending issues, including:

In the white paper, BlackRock breaks down the concerns raised by regulators and explains the mechanics of each practice, the risks involved and appropriate safeguards that are in place to manage these risks.

BlackRock and other asset managers like Fidelity and Vanguard have come under regulatory scrutiny following the financial crisis, as regulators attempt to prevent future meltdowns. These and other large asset managers are concerned that the FSOC may designate them as systemically important, compelling greater oversight of these institutions. The asset management industry has lobbied fiercely against the Systemically Important Financial Institution (SIFI) designation (for more information on SIFI designation, see Legal Update, Federal Reserve Board Issues Final Rule Related to Designating Systemically Important Nonbank Financial Institutions).

One of the misunderstandings that BlackRock addresses is the assertion that asset managers involved in securities lending behave like banks in many ways. Asset managers strongly oppose such comparisons because of their different business models. Unlike banks, asset managers act as agents managing other peoples' money.