By Trevor Hunnicutt

NEW YORK (Reuters) - BlackRock Inc <BLK.N> portfolio managers will be allowed to borrow from their peers if they are pressed for money to cash out clients, U.S. Securities and Exchange Commission officials said on Tuesday.

Mutual funds and money market funds offered by the world's largest asset manager will be able to borrow up to 10 percent of their assets through BlackRock's "InterFund Program" without putting up assets as collateral or up to a third of their assets in total.

BlackRock first asked the regulatory agency in 2015 for permission to let its mutual funds borrow cash from one another, for instance to meet a hypothetical spike in requests by clients to redeem their shares.

Some other U.S. mutual fund companies are already allowed to let their funds lend cash to one another, but BlackRock's request came as regulators and Wall Street are putting mutual funds' liquidity under a microscope.

Late last year, for instance, Third Avenue Management liquidated its near $1 billion Focused Credit Fund as its junk bond investments came under pressure.

The SEC last year proposed a requirement that all U.S. mutual funds and exchange-traded funds step up planning to ensure liquidity, though the rules have not yet been finalized.

"No question about it: Liquidity risk management is high on the regulators' agenda, not just here in the United States, but around the world," said David Tittsworth, counsel at Ropes & Gray LLP in Washington and a longtime specialist in fund management.

By law mutual funds are expected to honor redemption requests within seven days. And while mutual funds are urged by SEC guidance to cap their investments in hard-to-sell securities at 15 percent, this is not a legal requirement.

In addition to meeting redemptions, funds could also use the loans to tide themselves over if the piping that supports trade settlement and cash delivery fails, BlackRock has said.

The cash for the loans would come from other BlackRock funds, which BlackRock told the SEC will likely earn more in interest from lending to their peers than they would investing in short-term debts like repurchase agreements.

But that interest rate would also be lower than what banks would charge funds to borrow for the same purpose.

BlackRock, which manages nearly $5 trillion in assets, has already arranged for its funds to be able tap outside credit lines during times of stress.

(Reporting by Trevor Hunnicutt in New York; Additional reporting by Lisa Lambert in Washington; editing by Sandra Maler, Bernard Orr)