EUROPEAN UNION: ESMA Publish Keynote Speech on Stress Testing and Money Market Funds

Tuesday November 21 2017

On 17^th November 2017, Steven Maijoor gave a keynote speech on stress testing and money market funds.

Securities market regulators will benefit from the experience acquired with the Money Market Funds Regulation. In addition to the definition of common reference parameters the stress tests will include a macro-economic shock, thus allowing supervisors to design macro scenarios in order to capture system-wide events.

The MMF Regulation obliges each MMF to have in place sound stress testing processes that allow the identification of possible events or future changes in economic conditions which could have unfavourable effects on the MMF. The manager of the fund has to assess the potential impact that those events or changes could have, and must conduct regular stress tests in order to do so.

The Regulation obliges ESMA to issue guidelines with a view to establishing common reference parameters of the scenarios to be used in the stress tests. The Level 1 text is already quite specific about the factors that need to be taken into account but it is not exhaustive, so ESMA have been able to develop a useful guidance on each of these factors.

As a complement to ESMA’s work on the macro stress scenarios and the specific framework for stress testing under the MMF Regulation, ESMA are also planning to provide more general guidance on stress testing practices covering both UCITS and AIFs.

Please click on the above link for more information.