FRANCE: AMF Confirm Compliance with ESMA’s Guidance on Liquidity Stress Testing

Friday September 25 2020

On 25^th September 2020, the AMF announced that it has confirmed compliance with the ESMA’s guidelines on liquidity stress test scenarios for UCITS funds and AIFs and has published a new policy to this effect: DOC-2020-08.

Notification to ESMA after the publication of official translations

Following the publication of its final report in September 2019, in July 2020, ESMA published official translations of its guidelines on liquidity stress tests applicable to UCITS and AIFs. These guidelines will take effect on 30 September 2020. On 16 September, the AMF notified ESMA that it complied with these guidelines through the publication of Position DOC-2020-08.

Clarification of the provisions presented in the collective management directives

The guidelines clarify the provisions set out in the UCITS and AIFM directives as well as their implementing provisions. Although money market funds therefore also fall under these provisions, in the event of conflict, their specific guidelines shall take precedence.

The guidelines are mainly applicable to managers of UCITS and AIFs. They specify in 16 sections how management companies must conduct liquidity stress testing. Provisions also apply to depositaries, who must ensure that these programmes are effectively implemented, as well as to the competent authorities, who may ask managers to send them their liquidity stress tests or any other related information.

Guides with a pedagogical focus

The AMF guide to “the use of stress-tests as part of risk management” and the guide published by the Association Française de la Gestion Financière (French Asset Management association – AFG) “on compliance with the liquidity risk management system” will help management companies to comply with guidelines. However, they must be considered as pedagogical tools.

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