15 February 2018

AIMA: ESRB publishes recommendation on liquidity and leverage risks in investment funds

The Recommendation focuses on five areas where the ESRB sees a need to provide supervisory authorities with guidance on applying macroprudential elements of the current regulatory framework and/or for legislative changes to be made:

• Liquidity management tools for redemption: A common legal framework governing the inclusion of additional liquidity management tools in the design of investment funds originating anywhere in the European Union;
• Additional provisions to reduce the likelihood of excessive liquidity mismatches: Measures to limit the extent to which the use of liquidity transformation in open-ended AIFs could contribute to the build-up of systemic risks or the risk of disorderly markets;
• Stress testing: ESMA to develop guidance for managers on the stress testing of liquidity risk for individual AIFs and UCITS;
• UCITS reporting: Establishing a harmonised UCITS reporting framework across the EU to make it easier for authorities to monitor such funds and assess any risks to financial stability; and
• Guidance on Article 25 AIFMD: ESMA to develop guidance to help supervisory authorities both assess leverage risks in the AIF sector and design, calibrate and implement macroprudential leverage limits

Full news

ESRB_recommendation

© AIMA - Alternative Investment Management Association