On the 9th October 2020, the Central Bank issued the 35th edition of the Central Bank AIFMD Q&A, which includes a new Q&A ID 1133 in relation to liquidity stress testing in AIFs.
The Q&A clarifies the Central Bankās expectations in relation to liquidity stress testing in AIFs, particularly in relation to the application of the ESMA āGuidelines on liquidity stress testing in UCITS and AIFsā. The Q&A sets out the Central Bankās reporting expectations where a stress test reveals a material risk.
ID 1133
A.Ā The ESMA Guidelines on liquidity stress testing in UCITS and AIFs, Section V.3 āInteraction with National Competent Authoritiesā states that managers should notify NCAs of material risks and actions taken to address them. How should this notification be made and what should be included in the notification?
Q.Ā Notification to the Central Bank takes the form of a two-stage process. Initial notification: The Central Bank requires that it be immediately informed via an ONR IF Regulatory Report if a stress test performed reveals a material risk. Subsequent notification: In addition to this initial notification, where a stress test reveals a material risk, the manager should draw up an extensive report with the results of the stress testing and a proposed action plan. Where necessary, the manager should take action to strengthen the robustness of the AIF including actions that reinforce the liquidity or the quality of the assets of the AIF. The manager shall again immediately inform the Central Bank via an ONR IF Regulatory report of the measures taken, to include the extensive report and the action plan.