BlackRock Chairman Praises New York ETF Rule

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Robert S. Kapito, President and Director of black rock, during the company’s January 14 earnings call, but a company spokesperson on Friday declined to say whether BlackRock was among those who submitted supporting comment letters.

The New York State Department of Financial Services, the state’s insurance regulator, released new regulations in December that, until January 1, 2027, allow shares of an ETF to be treated as bonds for the purposes of the risk-based capital of a national insurer. report provided that the ETF meets certain criteria.

“This puts bond ETFs on par with bonds in an insurer’s portfolio,” Kapito said Jan. 14 during the company’s Q4 2021 earnings call, adding that BlackRock is “very excited that insurers will now be using more ETFs to represent their bond portfolio.”

The difference between treating a stake as debt versus equity for venture capital purposes “is an order of magnitude,” said attorney Daniel A. Rabinowitz, a partner at law firm Kramer Levin. Naftalis & Frankel, in an interview in November. “You have to hold much, much more capital against equity securities.”

Among the criteria an ETF must meet to qualify under the new regulations is that the fund must track a bond index and have at least $1 billion in assets under management. A public comment period held before the regulations were passed drew responses from a life insurance industry trade association, a professional association of asset managers and five fund managers, according to the assessment of public comments posted on the DFS website, which did not identify the comments.

BlackRock does not comment on its engagement with regulators, a BlackRock spokesperson said.

While comment letters from the two trade associations and three of the asset managers expressed “wholehearted support” for the new regulations, two other asset managers called for the favorable treatment to be extended to fixed income ETFs. actively managed, according to the assessment.

“Limiting the applicability of regulation to fixed income index ETFs at best ensures that ETF portfolio management follows a rules-based approach that approximates a more conservative buy-and-hold type strategy as opposed to trading active,” the rating reads. “As a result, DFS has made no changes in response to this comment.”

In its comment letter, the Life Insurance Council of New York said it “strongly believes that bonds (ETFs) have become an increasingly important investment and risk management tool for insurance companies. , especially as the markets have experienced volatility in recent years.”

Bond market liquidity has declined from what it was before the 2008-09 financial crisis “and as a result sourcing bonds has become an expensive and time consuming endeavor”, November 16, 2021 letter signed by Timothy D. Atkins, general manager and council counsel, said.

“During this time, the liquidity of bond ETFs has steadily grown,” the letter said.

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