(Bloomberg) — The U.S. needs to follow through on plans to impose tougher rules on nonbank financial institutions such as mutual funds and insurers that are increasingly posing a risk to the financial system, the International Monetary Fund said.
It’s critical that U.S. policy makers finish implementing the Dodd-Frank Act of 2010, the Washington-based lender said Tuesday in a report on the stability of the financial system in the world’s biggest economy.
“The regulatory landscape remains fragmented resulting in gaps, overlaps, and the potential for delayed responses to emerging risks, and should be simplified over time,” the IMF said in the assessment, which it conducts every five years.
The Financial Stability Oversight Council, overseen by the Treasury Department, needs to impose the tougher standards it has promised to put in place on non-banks designated as “too big to fail,” the IMF said.
The fund’s warning comes as lawmakers and policy makers prepare to mark the fifth anniversary of the 2010 law, which was designed to insulate the financial system against a repeat of the 2008 crisis.
The FSOC has designated four non-bank financial institutions as systemically important: MetLife Inc., Prudential Financial Inc., General Electric Capital Corp. and American International Group Inc.
The IMF said non-bank institutions such as insurers, hedge funds and other managed funds now account for more than 70 percent of U.S. financial-industry assets. These institutions “appear to be taking on higher credit and duration risk, and concern remains about the relative opacity of the leverage and other risks embedded in securities lending and cash reinvestment,” the fund said.