Regulator orders Investment Funds to Manage Liquidity better- UK

 (Reuters) - Some asset managers face sanctions for failing to manage liquidity properly, posing risks to market stability and investors' ability to withdraw money, Britain's Financial Conduct Authority (FCA) said on Thursday.

The suspension of property funds in Britain and difficulties faced by liability-driven investment funds last September have thrown a spotlight on the ability of asset managers to drum up enough cash to meet investor redemptions or collateral calls.

The watchdog said its review of asset managers found that while some firms showed very high standards, most fell short in some aspects of liquidity management, with a minority having inadequate frameworks to manage liquidity risks.

The watchdog had already asked firms to review their liquidity arrangements back in 2019, and boards of asset managers should study the findings of the review, the FCA said.

"It's vital the outliers take quick action. They risk regulatory intervention if they don’t take this opportunity to address weaknesses," it added.

Asset managers should also perform liquidity stress testing diligently, and use liquidity management tools appropriately, it said.