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Bank of England’s Haldane Warns of Run Against $87 Trillion Investment Fund Market

April 5, 2014 (EIRNS)—Andrew Haldane, the Bank of England’s financial stability head, who supports a return to Glass-Steagall, warned in a speech at the London Business School that the $87 trillion fund management business is now a major risk for the entire financial system.

"Future illiquidity pressures in financial markets, generated by asset management distress or wholesale portfolio reallocation, may be larger and more potent. In other words, Black Swan risk in asset management may be real and rising," Haldane said, according to the Daily Telegraph. Pointing to the danger of a sudden "fire sale" of assets by fund managers, Haldane said, "Falling asset prices may be the prompt for withdrawal or sales. In some respects, this would mimic a banking ’run,’ albeit operating through non-conventional channels. This could itself induce a further round of asset sales in an amplifying loop," he said.

The world’s 10 biggest fund managers control just under 30% of total assets, as compared to the world largest banks, which control 20% of global assets. Haldane warned that this creates the specter of a "too big to fail" problem among fund managers. With 40% of European assets managed in the City of London.