ECB sounds asset alert

Stricter curbs are needed on the €10trn asset management sector to control leverage and stop any heavy outflow of money rocking the financial system, the ECB’s vice-president said.

Yesterday’s comments from Vitor Constancio mark the latest signal from regulators that the growing asset management sector will face far closer scrutiny in coming years, as risks shift from the banking sector to so-called shadow banking.

Mr Constancio said the amount of leverage taken on by private equity and hedge funds should be kept under control as it has the potential to destabilise the European financial system.