MMF - ESMA Guidelines On Stress Test Scenarios

On 19 July 2019, ESMA published its final report relating to the 2019 update of the Guidelines on stress tests scenarios ("Stress Tests Guidelines") under the Money Market Fund Regulation ("MMF Regulation"). These Guidelines are in the process of being translated into the official EU languages.

In particular, Section 4.8 of the Stress Tests Guidelines was updated. This section provides the obligation for managers of money market funds ("MMFs") to conduct additional common reference stress test scenarios and to report the results of these tests to their competent authorities.

The additional common reference stress test scenarios that managers of MMFs should conduct relate to the level of changes of liquidity, credit risk, interest rates and exchange rates, level of widening or narrowing spreads among indices to which interest rates of portfolio securities are tied, levels of redemption, and macro-economic shocks affecting the economy as a whole.

The results of these tests must be reported in accordance with Article 37 of the MMF Regulation. In this context, on 19 July 2019, ESMA also published a final report on the Guidelines on the reporting to competent authorities under Article 37 of the MMF Regulation ("Reporting Guidelines").

The amendments introduced by the Stress Tests Guidelines and the new...