The exercise focused on liquidity risk in corporate debt and real estate funds, with the results showing that the funds included in the scope of the analysis do not pose any substantial risk for financial stability.
The European Securities and Markets Authority
(ESMA), the EU’s securities markets regulator, has carried out a
supervisory engagement with investment funds together with National
Competent Authorities (NCAs).
While the overall degree of compliance is
satisfactory, it also highlights some room for improvement and continued
monitoring, especially on the liquidity stress testing and valuation of
less liquid assets. Many NCAs reported that management companies were
able to manage episodes of valuation uncertainty in March 2020 and that
they have not identified any strong valuation issue for the funds in the
scope of the exercise.
Background
In May 2020, the ESRB recommended that ESMA coordinate with NCAs on a
focused supervisory engagement with investment funds that have
significant exposures to corporate debt (different from MMF) and real
estate, in order to assess their preparedness to potential future
redemptions and valuation shocks (ESRB/2020/4).
ESMA has followed-up on steps undertaken by NCAs with regard to the priority areas defined in the ESMA Final Report published on 12 November 2020.
Next steps
ESMA, in 2022 will facilitate discussions on these topics among NCAs
on the application of the Liquidity Stress Testing (LST) guidelines in
UCITS and AIFs and is conducting a 2022 CSA on the valuation of less
liquid assets in UCITS and open-ended AIFs.
ESMA
© ESMA
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article