Blackrock, Inc. · NYSE:BLK
Blackrock — Investor Presentation (September 2020)
17 slides from Blackrock's investor presentation, September 2020
Slide 1: Financial Stability and Non-Bank Financial Institutions
September 2020 Financial Stability and Non-Bank Financial Institutions
Slide 2: Background for NBFI discussions
• Public Background for NBFI discussions NBFI is a broad and complex ecosystem in which Including adoption of a ‘products and activities’ approach financial market utilities play an important role… Hedge 2015: FSB and FSOC pivoted to ‘products and Funds activities’ approach, recognizing: Banks Marke
Slide 3: COVID-19 Market Experience and Official Sector Response
• Public COVID-10 Market Experience and Official Sector Response Financial Markets March 2020 Official Sector Programs US Treasury market freezes up: bid-ask spreads for off-the- 03/12 run 20y+ US Treasuries peak at 188bp during March - ECB Asset Purchase Programme expanded by €120 over 2020 - ECB i
Slide 4: Core principles for policymaking
• Public Core principles for policymaking POLICYMAKING SHOULD BE DATA DRIVEN • Speculative statements and untested hypotheses should not drive new regulation or policy measures • Multiple market events as well as new reporting requirements has created a wealth of new data • The resilience of ETFs an
Slide 5: Top Ten Lessons from COVID-19
• Public Top Ten Lessons from COVID-19 BANKS entered the crisis with strong liquidity and MMF REFORM proved beneficial in some areas – including 1 capital positions. HOWEVER post-GFC capital 6 higher quality, shorter maturity, more liquid portfolios; and regulation constrained balance sheets even af
Slide 6: Mutual Funds: Just the Tip of the Iceberg
• Public Mutual Funds: Just the Tip of the Iceberg(i) • Mutual funds are an important component of the capital markets ecosystem • US mutual fund data is readily available; asset owner data is required to create a full picture Commercial Paper Treasury Agency and Corporate & Municipal Bonds GSE-Back
Slide 7: Approach to Regulatory Reform
• Public Approach to Regulatory Reform BANKS CAN PLAY AN IMPORTANT ROLE • Crisis response from central banks was swift and effective • Regulatory relief helped increase balance sheet capacity in some areas, but regulatory ‘buffers’ became a ‘floor’, constraining intermediation • Policy should strike
Slide 8: Key Recommendations for Reforms
• Public Key Recommendations for Reforms BANKS MARKET STRUCTURE PRODUCTS & ACTIVITIES Capital and liquidity buffers Treasuries MMF buffers • Incorporate into the regulatory framework • Consider expanding scope of reporting and • Decouple 30% liquid asset requirement for guidance on when banks can us
Slide 9: Money Market Funds (MMFs)
• Public Money Market Funds (MMFs) Observations from the COVID-19 crisis 1. Post-GFC capital and liquidity requirements left banks unwilling to intermediate commercial paper during stress 2. This OTC model for secondary CP markets froze, whereas derivatives and equity markets continued to function 3
Slide 10: Open-end Funds (OEFs)
• Public Open-end Funds (OEFs) Observations from the COVID-19 crisis 1. During March, markets underwent a flight to cash and quality, with credit markets coming under particular pressure 2. Bond funds saw high absolute outflows which represented a reasonable % of fund AUM; even high yield fund flows
Slide 11: Exchange Traded Funds (ETFs)
• Public Exchange Traded Funds (ETFs) March 2020 saw extreme market volatility and bond ETFs provided real-time price discovery – reflected at market conditions, but elevated ETF trading volumes times in discounts to NAV – as bond market liquidity allowed investors to allocate capital, adjust positi
Slide 12: Central Clearing Platforms (CCPs)
• Public Central Clearing Platforms (CCPs) Observations from the COVID-19 crisis 1. Post-GFC reforms increased central clearing of derivatives, improving transparency and lowering counterparty risks 2. Reforms proved effective: centrally cleared US futures and options hit an all-time high of 1.43bn
Slide 13: Areas requiring further discussion (1/2)
• Public Areas requiring further discussion (1/2) NBFI ecosystem BBB bonds and fallen angels Discussion of non-bank finance often focuses on asset An increasing proportion of BBB bonds in the Investment management, where data availability is stronger Grade universe and downgrades increasing ‘fallen
Slide 14: Areas requiring further discussion (2/2)
• Public Areas requiring further discussion (2/2) Liquidity risk management Macroprudential controls Many commentators suggest there is a ‘mismatch’ • Some suggest macroprudential tools should be between open-ended fund assets and liabilities implemented for asset management and funds • The case for
Slide 15: Relevant publications
• Public Relevant publications BlackRock External Public Policy ViewPoint papers • Antonio Weiss : Treasury Markets: Data, Oversight, and • Lessons from COVID-19: Transparency – Overview of Financial Stability and Non-Bank Financial • Darrell Duffie : Still the world’s safe haven? Redesigning the U.
Slide 16: Endnotes
• Public Endnotes (i) Federal Reserve Z.1 data as of June 2020. Available at: https://www.federalreserve.gov/releases/z1/20200611/z1.pdf . Graphic not to scale. (ii) EPFR fund flow data. Covers high yield bond funds domiciled in all jurisdictions globally (iii) Bloomberg, NYSE, BLK. As of June 17, 2
Slide 17: Important Notes
• Public Important Notes This publication represents the regulatory and public policy views of BlackRock. The opinions expressed herein are as of September 2020 and are subject to change at any time due to changes in the market, the economic or regulatory environment or for other reasons. The inform