Public Policy ViewPoints
To explore our localized products and services, please select a country first
Through the Public Policy ViewPoint series, BlackRock examines public policy issues and assesses the potential long-term implications for investors.
What's Next for the Eurozone?
December 2011
The high drama and furious pace of developments in the European debt crisis have not let up. This paper reviews the outcome of December 9 European summit and discusses what it means for markets and investors. The primary takeaways include: The actions by the European Central Bank to secure bank access to funding reduce the possibility of a doomsday credit crunch. Ratings agencies are likely to downgrade eurozone debt in the near future, but markets have largely factored in these moves. And BlackRock now expects a eurozone downturn that will cut GDP by 1% to 2% and push Germany and France into recession.
Restoring Investor Confidence
December 2011
Much has happened over the past decade to reshape the economic landscape. The greater sophistication and more complex structure of financial markets, rapid technological developments, and the increase in third-party intermediated distribution models have enhanced the opportunities available to investors. In this ViewPoint, we look at how to rebuild investor confidence in the light of European proposals to update consumer regulation of financial services. We consider how to preserve investor choice and make specific recommendations to improve the regulation of product providers and distributors.
ETFs: A Call for Greater Transparency and Consistent Regulation
October 2011
In this ViewPoint, we provide background on the history and structure of ETFs, summarize recent concerns that have been raised by regulators, and recommend reforms that would improve the marketplace for ETFs. We explicitly support uniform standards on labeling, transparency, disclosure, and reporting that would reduce systemic risk, improve investor protection, and help ensure that investors understand precisely the risks and attributes of the products that they are purchasing.
Money Market Funds: Potential Capital Solutions
August 2011
Proposals related to further structural reform of money market funds remain highly topical today. In this ViewPoint, we review the objectives and constraints surrounding additional reform, focusing specifically on capital solutions. As change is considered, care must be taken to ensure that the reforms, both individually and collectively, achieve the objective of protecting investors without inadvertently destabilizing financial markets.
Comments on the US Debt Ceiling Crisis
August 2011
The debt ceiling crisis came down to the wire on August 2, 2011 as Congress voted on a framework to raise the debt ceiling and reduce spending over the next decade. These developments are clearly positive in terms of reducing the risk of a US debt default. Although these actions have reduced the likelihood of a downgrade by one or more of the rating agencies, that risk is still not at zero. In this paper, we review the significant uncertainties that remain.
Preparing for a Possible US Treasury Rating Downgrade: Implications of Current Debt Ceiling Debate
July 2011
The US government will be forced to make difficult decisions in preparation of the debt ceiling being reached. If it is not raised by August 2, 2011 (or earlier, since the legislation has to be drafted, reviewed, passed, reconciled, and subsequently signed), according to Treasury Secretary Timothy Geithner, the US will begin to default on some of its obligations. In this paper, we assesses the current situation leading up to the deadline and highlights the major unintended consequences for investors and the global economy if US debt is downgraded.
Equity Market Trading in Europe: The Case for Refinement Over Revolution
June 2011
Three years after implementation, the cornerstone of financial market regulation in the EU - the Markets in Financial Instruments Directive (MiFID) - is under review. We have a strong interest in competitive and efficient markets and a regulatory regime that encourages liquidity, transparency, and price discovery. In this ViewPoint, we focus on global policy discussions pertinent to today's equity market landscape in Europe and the case for refinement, rather than revolution, of the existing regime.
Implementation of CFTC's Position Limits Could Stymie Commodity Derivatives Investment
June 2011
Enhanced regulation of the commodity derivatives markets has been on the agenda of elected officials for some time. In this ViewPoint, we provide historical background on commodity derivatives market regulation, examine the Commodity Futures Trading Commission's (CFTC's) current proposal, and assess the ways in which the new regulatory regime could impact investors.
BlackRock: Worldwide Leader in Asset Management
June 2011
While BlackRock is known as a large asset manager, our size says little about our structure and risk profile, our history, or how we function today. In this ViewPoint, we provide an overview of our organization and discuss the factors that differentiate BlackRock specifically, and the asset management industry more generally.
Money Market Funds: The Importance of Credit Research and NRSRO Ratings
May 2011
The events of 2008, including the historic "breaking of the buck" by the Reserve Primary Fund in September of that year, brought to light both idiosyncratic (fund-specific) and systemic (industry-wide) risks associated with money market funds, and gave rise to several reform measures designed to enhance the stability of that segment of the market. The Dodd-Frank Act subsequently instructed the SEC to make certain additional changes to money fund regulations. One recent proposal resulting from this mandate addresses the use of NRSRO ratings by fund advisors. In this ViewPoint, we assess the SEC proposal, highlighting our belief that while advisors must conduct independent credit evaluations, ratings provide useful preliminary screens in the evaluation process.
Foreign Account Tax Compliance Act: Challenges for Investors
May 2011
The Foreign Account Tax Compliance Act (FATCA), enacted into law last year with a January 2013 effective date, is an attempt to address tax evasion by US taxpayers by directing global financial firms, including non-US ones, to identify the underlying ownership of assets they hold. The financial impacts for investors could be quite severe. In this ViewPoint, we explore the potential implications and make a series of recommendations for the development of fair and administrable rules.
A Regulatory Roadmap is Not Banking Territory: Evolving Trends in Capital Requirements and Responses to Regulation
May 2011
Legislation stemming from the global financial crisis has resulted in a dramatic reshaping of the relationship between the banking sector and its regulatory overseers, with profound implications for investors across the capital structure. In this paper, the BlackRock Investment Institute explores key issues, which were debated recently at the Institute's Bank Capital Workshop. "A Regulatory Roadmap is Not Banking Territory: Evolving Trends in Capital Requirements and Responses to Regulation," draws on the participation and insights of dozens of senior portfolio managers from across the firm, as well as Advisory team professionals, to generate an outlook that drives enhanced investment performance for clients.
Alternative Investment Fund Managers Directive (AIFMD): An Overview and Analysis
May 2011
The AIFMD is one of the most radical, politicized, and controversial directives reshaping fund management and marketing regulation in the EU. The impetus behind the Directive was to prevent hedge funds posing risk to European financial stability, though the scope is far wider than just hedge funds and private equity. Although the final text of the AIFMD is far better than the original Commission proposal, we are continuing to engage at Level 2 (implementation measures) with trade associations and regulators on behalf of our clients. Investors should continue to have access to best-in-class funds wherever such funds are domiciled or managed.
Revisiting the Flash Crash: A Year Has Passed, What Has Changed?
May 2011
While it took months to sift through the data to determine what actually happened on May 6th - and we still do not know for certain what triggered the Flash Crash - the lesson of the event was clear from the beginning: better rules are needed to help protect investors, and to reflect the tremendous evolution that has occurred in the markets in recent years. What has happened since the Flash Crash to reform markets to reduce the risk of a similar event?
States Begin to Address Long-Term Pension Obligations in Era of Fiscal Austerity
April 2011
Municipal bond markets continue to make headlines, but has default risk been overestimated? In this ViewPoint, we examine the current risks - particularly as they relate to public pension plans obligations - and investment opportunities.
UCITS IV Key Investor Information Document: The Challenge of Providing Clear Product Disclosure
April 2011
In this ViewPoint, "UCITS IV Key Investor Information Document: The Challenge of Providing Clear Product Disclosure," we provide background on the Key Investor Information Document (KIID), which will replace the existing simplified prospectus. Following the financial crisis, there was a strong drive to provide clearer product information to investors. The KIID identifies the key elements of a fund, helping investors to understand the nature and risks of the fund in order to make more informed investment decisions.
Financial Regulatory Reform: Developments for Insurance Companies
March 2011
During the financial crisis, the insurance industry, which is currently regulated at the state level by commissioners, came under scrutiny. In this paper, "Financial Regulatory Reform: Important Developments for Insurance Companies," we explore how recent developments, including the establishment of the Federal Insurance Office, may impact the industry in the future.
The RIC Modernization Act: A Milestone for the Fund Industry
March 2011
The Regulated Investment Company (RIC) Modernization Act of 2010, which was signed into law on December 22, 2010, makes changes to a number of technical rules related to the tax treatment of RICs. Prior to the enactment of this legislation, the statutory framework governing RICs had not been meaningfully updated since the passage of the Tax Reform Act of 1986. In this paper, we summarize the major provisions of the Act, highlighting areas of notable improvement.
Getting Housing Finance Back on Track
February 2011
In this paper, "Getting Housing Finance Back on Track," we recommend a set of guiding principles to be considered when evaluating US housing finance policy. We also assess the options presented in "Reforming America's Housing Finance Market - A Report to Congress," which was released by the US Treasury Department and US Department of Housing and Urban Development on February 11, 2011.
Regulatory Developments in Europe: An Overview and Analysis
February 2011
In this paper, "Regulatory Developments in Europe", we review key regulatory developments affecting the European financial sector, the markets, businesses and investors. We also consider the implications- including opportunities- that could arise from the new legislation, enacted at both the European and national levels, with a number of US legislative initiatives also set to impact the European financial industry in the relative short term.
Money Market Fund Reform: Discussion of Reform Proposals
January 2011
In this paper, we review several proposals outlined in the "Money Market Fund Reform Options" report issued by the President's Working Group on Financial Markets. While the proposed solutions are many, we believe the goal of the investment community and policymakers is one and the same: reduce systemic risk without damaging money market mutual funds' important role as a source of value to investors and funding to the short-term capital markets.
The New Regulatory Regime for Money Market Funds: A Window into the Mark-to-Market NAV
January 2011
In this paper, "The New Regulatory Regime for Money Market Funds: A Window into the Mark-to-Market NAV," we review some of the factors that influence the mark-to-market NAV and its characteristic daily fluctuations. Ultimately, we believe that the new regulatory regime will prove beneficial to investors by supplying them with more detailed information on fund managers' investment philosophies and approaches to risk management.
OTC Derivative Market Reforms: An Investor Perspective
November 2010
In the wake of the financial crisis, legislators and regulators around the world have initiated a variety of proposals aimed at reducing the systemic risks posed by OTC derivatives. In this ViewPoint, "OTC Derivative Market Reforms: An Investor Perspective," we summarize current proposals, offer our views on their effectiveness, and highlight issues that should be addressed before new rules take effect.
Understanding the Flash Crash: What Happened, Why ETFs Were Affected, and How to Reduce the Risk of Another
November 2010
Although several months have passed since the Flash Crash occurred, uncertainty remains on the trigger or triggers for the sudden U.S. equity free fall (and recovery) on the afternoon of May 6. However, the lesson of the event is clear: better rules are needed to protect investors, and to reflect the tremendous evolution that has occurred in the markets in recent years. In this ViewPoint, "Understanding the 'Flash Crash,'" we explore what happened on May 6, how it affected investors, and what can be done to lessen the likelihood of similar market disruptions in the future.
Mutual Funds in the Spotlight: Is a paradigm shift necessary or desirable?
October 2010
The adoption of recent regulatory proposals in the U.S. could have a dramatic impact on the mutual fund industry. In this ViewPoint, "Mutual Funds in the Spotlight: Is a Paradigm Shift Necessary or Desirable?," we assess the potential implications of the proposals and recommend an approach that promotes investor protection without undermining the solid foundation on which mutual funds have thrived.
Fin Reg and Beyond: Global Implications for Investors
October 2010
In this ViewPoint, "Fin Reg and Beyond: Global Implications for Investors," we discuss current and pending financial regulatory reform. We summarize various studies, proposals, and legislative changes in the U.S. and Europe and describe the likely impacts for investors.
Financial Regulatory Reform: Reform Arrives in the Boardroom
October 2010
In this ViewPoint, "Financial Regulatory Reform: Reform Arrives in the Boardroom," we examine the corporate governance provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act that alter dynamics between investors and shareholders.
The Rise of UCITS III
September 2010
In this ViewPoint, "The Rise of UCITS III," we examine recent regulatory changes in Europe that have allowed regulated mutual fund structures to deploy enhanced investment powers, enabling leverage, paving the way for the use of derivatives, and making absolute return products available to the retail investor.
Money Market Mutual Funds: The Case Against Floating the Net Asset Value
July 2010
One recommendation, among a series of regulatory reform proposals, is that money market funds – known and appreciated for their stable NAV structure – assume a floating NAV structure. In this ViewPoint, "Money Market Mutual Funds: The Case Against Floating the Net Asset Value," we suggest that such a change would not simply alter the nature of a single investment vehicle, but would have far-reaching implications and negative consequences for the entire financial system.
Financial Regulatory Reform: A Review of Legislation and Implementation
July 2010
Following the U.S. Congress conference committee's approval of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we highlight the major provisions of the bill and analyze their likely impacts.
Financial Services Regulatory Reform: A Discussion of Proposed New Rules and Legislation
May 2010
U.S. Congress and regulatory agencies have been considering various measures to strengthen the regulatory framework governing the financial services industry for over a year. The past month has seen a flurry of activity and clarity is beginning to emerge on a number of fronts. Although firm decisions have yet to be made, and current proposals may change considerably before they are finalized, we share our thoughts on a number of issues that could have a broad impact across companies, products, and markets in this ViewPoint, "Financial Services Regulatory Reform: A Discussion of Proposed New Rules and Legislation."
Reducing Risk in the Global Financial System: A Proposal for OTC Derivative Markets Reform
February 2010
While we support efforts to improve the regulation and oversight of the OTC derivatives market, we want to ensure that new restrictions on these important financial instruments address existing risk concerns without creating unintended negative consequences.
Money Market Funds: A Proposal for a Capitalized Special Purpose Entity
February 2010
In this ViewPoint, "Money Market Funds: A Proposal for a Capitalized Special Purpose Entity," we examine both the role of money market funds and the ways in which idiosyncratic risk and systemic risk can be significantly mitigated, resulting in a beneficial outcome for issuers, investors, and the financial system.
Keeping Homeowners in Their Homes
December 2009
The credit crisis and its aftermath have fundamentally changed mortgages and the mortgage-backed securities market, and have threatened to make U.S. homeownership significantly less affordable. As a fiduciary for investors and a major investor in the mortgage sector, we are concerned that the current U.S. policy approach is not achieving its objectives and may have long-term, negative implications for both homeowners and capital markets.
These materials are part of a series of BlackRock public policy materials, published under the ViewPoints heading and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the dates specified in the materials posted and may change as subsequent conditions vary. The information and opinions contained in these materials are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy.
These materials may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in these materials is at the sole discretion of the reader.
These materials are being distributed/issued in Australia and New Zealand by BlackRock Financial Management, Inc. ("BFM"), which is a United States domiciled entity. In Australia, BFM is exempted under Australian CO 03/1100 from the requirement to hold an Australian Financial Services License and is regulated by the Securities and Exchange Commission under US laws which differ from Australian laws. In Canada, these materials are intended for permitted clients only. BFM believes that the information in this document is correct at the time of compilation, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BFM, its officers, employees or agents. Latin America these materials are intended for Institutional and Professional Clients only. These materials are solely for educational purposes and do not constitute an offer or a solicitation to sell or a solicitation of an offer to buy any shares of any fund (nor shall any such shares be offered or sold to any person) in any jurisdiction within Latin America in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in these materials, it is possible that they have not been registered with the securities regulator of Brazil, Chile, Colombia, Mexico and Peru or any other securities regulator in any Latin American country and no such securities regulators have confirmed the accuracy of any information contained herein. No information discussed herein can be provided to the general public in Latin America.
The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation.
BlackRock® is a registered trademark of BlackRock, Inc. All other trademarks are the property of their respective owners. © 2011 BlackRock, Inc. All rights reserved.