Bank collective investment trusts are not a significant source of risk to U.S. financial stability, ABA told the FSOC in response to FSOC’s inquiry into potential risks associated with the asset management industry. FSOC’s inquiry particularly focused on liquidity, redemptions and leverage of pooled investment vehicles, as well as operational risks and resolution of asset managers.
Bank CITs do not pose financial stability risks because of the fiduciary duties of the bank trustee, the limitations on participating accounts and the comprehensive regulatory regime to which they are subject, ABA said. In its letter, ABA also described briefly the rarely used process for resolving failed national and state-chartered trust companies that do not participate in the Deposit Insurance Fund to highlight that there is a regulator in place to methodically and quickly move assets held in fiduciary accounts to a receiving fiduciary bank.
Read the letter.