Thursday May 12 2022

News Source: Fund Regulation

Focus: Money Market Funds

Type: General

Country: European Union

ESMA have published updated guidelines on stress test scenarios under the MMF Regulation. The guidelines apply to competent authorities, money market funds and managers of money market funds as defined in the MMF Regulation.

The purpose of these guidelines is to ensure common, uniform and consistent application of the provisions in Article 28 of the MMF Regulation. In particular, and as specified in Article 28(7) of the MMF Regulation, they establish common reference parameters of the stress test scenarios to be included in the stress tests taking into account the following factors specified in Article 28(1) of the MMF Regulation:

  1. hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF;
  2. hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events;
  3. hypothetical movements of the interest rates and exchange rates;
  4. hypothetical levels of redemption;
  5. hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied;
  6. hypothetical macro systemic shocks affecting the economy as a whole.

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