Regulatory Alerts2021-06-23
Added · Updated
Guidelines on Article 25 of Directive 2011/61/EU
Competent authorities must assess leverage-related systemic risk quarterly by identifying Alternative Investment Funds (AIFs) that pose risks based on leverage levels, regulatory assets under management exceeding EUR 500 million, or unusually high leverage usage. The assessment requires a two-step approach evaluating market impact, fire sales, direct spill-overs to financial institutions, and interruption in credit intermediation using specific quantitative and qualitative indicators. Authorities should use these results to determine appropriate leverage limits, implementing them progressively to avoid procyclicality and ensuring they are proportionate to the risks posed. Competent authorities must notify ESMA of their compliance status within two months of publication and communicate risk assessment results annually.
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