Regulatory Alerts2024-12-19
Exploration of the Application of Liquidity Stress Tests by Asset Managers
The Dutch Authority for the Financial Markets (AFM) and De Nederlandsche Bank (DNB) conducted a thematic review of liquidity stress test (LST) practices among major asset managers in the second half of 2023. The findings indicate that while most managers have adequate LST policies aligned with ESMA guidelines, significant gaps remain in justifying test frequencies, utilizing hypothetical scenarios, and accounting for investor concentration on the liability side. Regulators expect all asset managers to fully implement ESMA guidelines and improve their LST frameworks to better mitigate risks from unexpected market shocks.
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