Guidelines on stress test scenarios under the MMF Regulation

DD/MM/2020 | ESMA34-49-172
Guidelines
On stress test scenarios under the MMF Regulation

Table of Contents

1. Scope............................................................................................................................. 4
2. Purpose.......................................................................................................................... 5
3. Compliance and reporting obligations............................................................................. 6
   3.1 Status of the guidelines.......................................................................................... 6
   3.2 Reporting requirements.......................................................................................... 6
4. Guidelines on stress test scenarios under Article 28 of the MMF Regulation (Financial
   market participants are not required to report results of stress tests referred to in sections 4.1
   to 4.7 below).......................................................................................................................... 7
   4.1 Guidelines on certain general features of the stress test scenarios of MMF........... 7
   4.2 Guidelines on stress test scenarios in relation to hypothetical changes in the level of
   liquidity of the assets held in the portfolio of the MMF.......................................................10
   4.3 Guidelines on stress test scenarios in relation to hypothetical changes in the level of
   credit risk of the assets held in the portfolio of the MMF, including credit events and rating events 11
   4.4 Guidelines on stress test scenarios in relation to hypothetical movements of the
   interest rates and exchange rates .....................................................................................12
   4.5 Guidelines on stress test scenarios in relation to hypothetical levels of redemption
   4.6 Guidelines on stress test scenarios in relation to hypothetical widening or narrowing
   of spreads among indexes to which interest rates of portfolio securities are tied...............14
   4.7 Guidelines on stress test scenarios in relation to hypothetical macro systemic shocks
   affecting the economy as a whole.....................................................................................14
   4.8 Guidelines on the establishment of additional common reference stress test
   scenarios (the results of which should be included in the reporting template mentioned in
   Article 37(4) of the MMF Regulation) ................................................................................14
   4.8.1 Level of changes of liquidity ..........................................................................15
   4.8.2 Level of change of credit risk.........................................................................16
   4.8.3 Levels of change of the interest rates and exchange rates and levels of
   widening or narrowing of spreads among indices to which interest rates of portfolio
   securities are tied........................................................................................................17
   4.8.4 Levels of redemption ......................................................................................19
   4.8.5 Macro-systemic shocks affecting the economy as a whole.........................22
5. Calibration for 2019.......................................................................................................24

5.1. Common reference parameters of the stress test scenarios in relation to hypothetical
changes in the level of liquidity of the assets held in the portfolio of the MMF...................25
5.2. Common reference parameters of the stress test scenarios in relation to hypothetical
changes in the level of credit risk of the assets held in the portfolio of the MMF, including
credit events and rating events .........................................................................................27
5.3. Common reference parameters of the stress test scenarios in relation to hypothetical
movements of the interest rates........................................................................................30
5.4. Common reference parameters of the stress test scenarios in relation to hypothetical
movements of the exchange rates ....................................................................................34
5.5. Common reference parameters of the stress test scenarios in relation to hypothetical
widening or narrowing of spreads among indexes to which interest rates of portfolio
securities are tied..............................................................................................................37
5.6. Common reference parameters of the stress test scenarios in relation to hypothetical
levels of redemption..........................................................................................................38
5.7. Common reference parameters of the stress test scenarios in relation to hypothetical
macro systemic shocks affecting the economy as a whole................................................40
6. Appendix .......................................................................................................................43

1. Scope
Who?
1. These guidelines apply to competent authorities, money market funds and managers
of money market funds as defined in the MMF Regulation1 .
What?
2. These guidelines apply in relation to Article 28 of the MMF Regulation and establish
common reference parameters for the stress test scenarios to be included in the stress tests conducted by MMFs or managers of MMFs in accordance with that Article. When?
3. These guidelines apply from two months after the date of publication of the guidelines
on ESMA’s website in all EU official languages (with respect to parts in red – the other parts of the Guidelines already apply from the dates specified in Articles 44 and 47 of the MMF Regulation). 1 Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds (OJ L 169, 30.06.2017, p. 8).

2. Purpose
4. 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:
a) hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF; b) hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events; c) hypothetical movements of the interest rates and exchange rates; d) hypothetical levels of redemption; e) hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied; f) hypothetical macro systemic shocks affecting the economy as a whole.
5. In accordance with Article 28(7) MMF Regulation, these guidelines will be updated at
least every year taking into account the latest market developments. In 2019, the
section 4.8 of these guidelines is in particular updated so that managers of MMFs have
the information needed to fill in the corresponding fields in the reporting template referred to mentioned in Article 37 of the MMF Regulation, as specified by Commission Implementing Regulation (EU) 2018/7082 . This information includes specifications on the types of the stress tests mentioned in this section 4.8 and their calibration.

3. Compliance and reporting obligations
3.1 Status of the guidelines
6. In accordance with Article 16(3) of the ESMA Regulation, competent authorities and
financial market participants must make every effort to comply with these guidelines.
7. Competent authorities to which these guidelines apply should comply by incorporating
them into their national legal and/or supervisory frameworks as appropriate, including where particular guidelines are directed primarily at financial market participants. In this case, competent authorities should ensure through their supervision that financial market participants comply with the guidelines.
3.2 Reporting requirements
8. Within two months of the date of publication of the guidelines on ESMA’s website in all
EU official languages, competent authorities to which these guidelines apply must notify ESMA whether they (i) comply, (ii) do not comply, but intend to comply, or (iii) do not comply and do not intend to comply with the guidelines.
9. In case of non-compliance, competent authorities must also notify ESMA within two
months of the date of publication of the guidelines on ESMA’s website in all EU official languages of their reasons for not complying with the guidelines.
10. A template for notifications is available on ESMA’s website. Once the template has
been filled in, it shall be transmitted to ESMA.

4. Guidelines on stress test scenarios under Article 28 of
the MMF Regulation (Financial market participants are not required to report results of stress tests referred to in sections 4.1 to 4.7 below)
4.1 Guidelines on certain general features of the stress test scenarios of
MMF
Scope of the effects on the MMF of the proposed stress test scenarios
11. Article 28(1) of the MMF Regulation requires MMFs to put in place “sound stress testing
processes that identify possible events or future changes in economic conditions which could have unfavourable effects on the MMF”.
12. This leaves room for interpretation on the exact meaning of the “effects on the MMF”,
such as:

• impact on the portfolio or net asset value of the MMF,
• impact on the minimum amount of liquid assets that mature daily or weekly as
  referred to in Article 24(c) to 24(h) and Article 25(c) to 25(e) of the MMF Regulation,
• impact on the ability of the manager of the MMF to meet investors’ redemption
  requests,
• impact on the difference between the constant NAV per unit or share and the NAV
  per unit or share (as explicitly mentioned in Article 28(2) of the MMF Regulation in the case of CNAV and LVNAV MMFs),
• impact on the ability of the manager to comply with the different diversification rules
  as specified in Article 17 of the MMF Regulation.
  13. The wording of Article 28(1) of the MMF Regulation should include various possible
  definitions. In particular, the stress test scenarios referred to in Article 28 of the MMF Regulation should test the impact of the various factors listed in Article 28(1) of the MMF Regulation on both i) the portfolio or net asset value of the MMF and ii) the liquidity bucket(s) of the MMF and/or the ability of the manager of the MMF to meet investors’ redemption requests. This broad interpretation is in line with the stress-testing framework of the AIFMD, which includes both meanings in its Articles 15(3)(b) and 16(1). The specifications included in the following sections 4.2 to 4.7 therefore apply to stress test scenarios on both aspects mentioned above.

14. With respect to liquidity, it is to be noted that liquidity risk may result from: (i) significant
redemptions; (ii) deterioration of the liquidity of assets; or (iii) a combination of the two. Historical scenarios and hypothetical scenarios
15. With respect to both stress test scenarios on i) the portfolio or net asset value of the
MMF and ii) the liquidity bucket(s) of the MMF and/or the ability of the manager of the MMF to meet investors’ redemption requests, managers could use the factors specified in sections 4.2 to 4.7 using historical and hypothetical scenarios.
16. Historical scenarios reproduce the parameters of previous event or crises and
extrapolate the impact they would have had on the present portfolio of the MMF.
17. While using historical scenarios, managers should vary the time windows in order to
process several scenarios and avoid getting stress test results that depend overly on an arbitrary time window (e.g. one period with low interest rates and another with higher rates). By way of example, some commonly used scenarios refer to junk bonds in 2001, subprime mortgages in 2007, the Greek crisis in 2009 and the Chinese stock market crash in 2015. These scenarios may include independent or correlated shocks depending on the model.
18. Hypothetical scenarios are aimed at anticipating a specific event or crisis by setting its
parameters and predicting its impact on the MMF. Examples of hypothetical scenarios include those based on economic and financial shocks, country or business risk (e.g. bankruptcy of a sovereign state or crash in an industrial sector). This type of scenario may require the creation of a dashboard of all changed risk factors, a correlation matrix and a choice of financial behaviour model. It also includes probabilistic scenarios based on implied volatility.
19. Such scenarios may be single-factor or multi-factor scenarios. Factors can be
uncorrelated (fixed income, equity, counterparty, forex, volatility, correlation, etc.) or correlated: a particular shock may spread to all risk factors, depending on the correlation table used. Aggregation of stress tests
20. In certain circumstances, in addition, managers could use aggregate stress test
scenarios on a range of MMFs or even on all the MMFs managed by the manager.

Aggregating results would provide an overview and could show, for example, the total volume of assets held by all the MMFs of the manager in a particular position, and the potential impact of several portfolios selling out of that position at the same time during a liquidity crisis. Reverse stress testing
21. In addition to the stress test scenarios discussed in this section, the inclusion of reverse
stress testing may also be of benefit. The intention behind a reverse stress test is to subject the MMF to stress testing scenarios to the point of failure, including the point where the regulatory thresholds set up in the MMF Regulation, such as those included in its Article 37(3)(a) would be breached. This would allow the manager of a MMF to have another tool to explore any vulnerabilities, pre-empt, and resolve such risks. Combination of the various factors mentioned in the following sections 4.2 to 4.7 with investors’ redemption requests
22. All factors mentioned in the following sections 4.2 to 4.7 should be tested against
several levels of redemption. This is not to say that at first, managers should not also test them separately (without combining them with tests against levels of redemption), in order to be able to identify the corresponding respective impacts. The way this combination of the various factors mentioned in the following sections 4.2 to 4.7 with investors’ redemption requests could be carried out is further specified in each of these sections.
23. In that context, some hypothesis on the behaviour of the manager with regard to
honouring the redemption requests could be required.
24. A practical example of one possible implementation is given in Appendix.
Stress tests in the case of CNAV and LVNAV MMFs
25. Article 28(2) of the MMF Regulation indicates that in addition to the stress test criteria
as set out in Article 28(1), CNAV and LVNAV MMFs shall estimate for different scenarios, the difference between the constant NAV per unit or share and the NAV per unit or share. While estimating this difference, and if the manager of the MMF is of the view that this would be useful additional information, it may also be relevant to estimate

the impact of the relevant factors included in sections 4.2 to 4.7 on the volatility of the portfolio or on the volatility of the net asset value of the fund. Non-exhaustiveness of the factors mentioned in the following sections 4.2 to 4.7
26. The factors set out in the following sections 4.2 to 4.7 are minimum requirements. The
manager would be expected to tailor the approach to the specificities of its MMFs and add any factors or requirements that it would deem useful to the stress test exercise. Examples of other factors that could be taken into account include the repo rate considering MMFs are a significant player in that market.
27. More generally the manager should build a number of scenarios, with different levels
of severity, which would combine all the relevant factors (which is to say that there should not just be separate stress tests for each factor – please also refer to the following sections 4.2 to 4.7).
4.2 Guidelines on stress test scenarios in relation to hypothetical changes
in the level of liquidity of the assets held in the portfolio of the MMF
28. With respect to the level of changes of liquidity of the assets mentioned in Article
28(1)(a) of the MMF Regulation, managers could consider such parameters as:

• the gap between the bid and ask prices;
• the trading volumes;
• the maturity profile of assets;
• the number of counterparties active in the secondary market. This would reflect the
  fact that lack of liquidity of assets may result from secondary markets related issues, but may also be related to the maturity of the asset.

29. The manager could also consider a stress test scenario that would reflect an extreme
    event of liquidity shortfall due to dramatic redemptions, by combining the liquidity stress test with a bid - ask spread multiplied by a certain factor while assuming a certain redemption rate of the NAV

4.3 Guidelines on stress test scenarios in relation to hypothetical changes
in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events
30. With respect to the levels of changes in credit risk of the asset mentioned in Article
28(1)(b), guidance on this factor should not be too prescriptive because the widening or narrowing of credit spreads is usually based on quickly evolving market conditions.
31. However, managers could, for example, consider:

• the downgrade or default of particular portfolio security positions, each representing
  relevant exposures in the MMF’s portfolio;
• the default of the biggest position of the portfolio combined with a downgrade of the
  ratings of assets within the portfolio;
• parallels shifts of the credit spreads of a certain level for all assets held in the portfolio.

32. With respect to such stress tests involving the levels of changes of credit risk of the
    asset, it would also be relevant to consider the impact of such stress tests on the credit quality assessment of the corresponding asset in the context of the methodology described in Article 19 of the MMF Regulation.
33. The manager should, for the purpose of combining different factors, combine changes
    to the level of credit risk of the assets held in the portfolio of the MMF with given levels of redemptions. The manager could consider a stress test scenario that would reflect an extreme event of stress due to uncertainty about the solvency of market participants, which would lead to increased risk premia and a flight to quality. This stress test scenario would combine the default of a certain percentage of the portfolio with spreads going up together while assuming a certain redemption rate of the NAV.
34. The manager could also consider a stress test scenario that would combine a default
    of a certain percentage of the value of the portfolio with an increase in short term interest rates and a certain redemption rate of the NAV

4.4 Guidelines on stress test scenarios in relation to hypothetical
movements of the interest rates and exchange rates
35. With respect to the levels of change of the interest rates and exchange rates mentioned
in Article 28(1)(c) of the MMF Regulation, managers could consider stress testing of parallel shifts of a certain level. More specifically, managers could consider depending on the specific nature of their strategy:
i. an increase in the level of short term interest rates with 1-month and 3-month treasury
rates going up simultaneously while assuming a certain redemption rate;
ii. a gradual increase in the long term interest rates for sovereign bonds;
iii. a parallel and/or non parallel shift in the interest rate curve that would change short,
medium and long interest rate;
iv. movements of the FX rate (base currency vs other currencies).
36. The manager could also consider a stress test scenario that would reflect an extreme
event of increased interest rates that would combine an increase in short-term interest rates with a certain redemption rate. The manager could also consider a matrix of interest rates / credit spreads.
4.5 Guidelines on stress test scenarios in relation to hypothetical levels
of redemption
37. With respect to the levels of redemption mentioned in Article 28(1)(d) of the MMF
Regulation, managers could consider redemption stress tests following from historical or hypothetical redemption levels or with the redemption being the maximum of either a certain percentage of the NAV or an opt-out redemption option exercised by the most important investors.
38. Stress tests on redemptions should include the specific measures which the MMF has
the constitutional power to activate (for instance, gates and redemption notice).
39. The simulation of redemptions should be calibrated based on stability analysis of the
liabilities (i.e. the capital), which itself depends on the type of investor (institutional, retail, private bank, etc.) and the concentration of the liabilities. The particular characteristics of the liabilities and any cyclical changes to redemptions would need to be taken into account when establishing redemption scenarios. However, there are

many ways to test liabilities and redemptions. Examples of significant redemption scenarios include i) redemptions of a percentage of the liabilities ii) redemptions equal to the largest redemptions ever seen iii) redemptions based on an investor behaviour model.
40. Redemptions of a percentage of the liabilities could be defined based on the frequency
of calculating the net asset value, any redemption notice period and the type of investors.
41. It is to be noted that liquidating positions without distorting portfolio allocation requires
a technique known as slicing, whereby the same percentage of each asset type (or each liquidity class if the assets are categorised according to their liquidity, also known as bucketing) is sold, rather than selling the most liquid assets first. The design and execution of the stress test should take into account and specify whether to apply a slicing approach or by contrast a waterfall approach (i.e. selling the most liquid assets first).
42. In the case of redemption of units by the largest investor(s), rather than defining an
arbitrary redemption percentage as in the previous case, managers could use information about the investor base of the MMF to refine the stress test. Specifically, the scenario involving redemption of units by the largest investors should be calibrated based on the concentration of the fund’s liabilities and the relationships between the manager and the principal investors of the MMF (and the extent to which investors’ behaviour is deemed volatile).
43. Managers could also stress test scenarios involving redemptions equal to the largest
redemptions ever seen in a group of similar (geographically or in terms of fund type) MMFs or across all the funds managed by the manager. However, the largest redemptions witnessed in the past are not necessarily a reliable indicator of the worst redemptions that may occur in the future.
44. A practical example of one possible implementation is given in Appendix.

4.6 Guidelines on stress test scenarios in relation to hypothetical
widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied
45. With respect to the extent of a widening or narrowing of spreads among indexes to
which interest rates of portfolio securities are tied as mentioned in Article 28(1)(e) of the MMF Regulation, managers could consider the widening of spreads in various sectors to which the portfolio of the MMF is exposed, in combination with various increase in shareholder redemptions. Managers could in particular consider a widening of spreads going up.
4.7 Guidelines on stress test scenarios in relation to hypothetical macro
systemic shocks affecting the economy as a whole
46. With respect to the identification of macro-systemic shocks affecting the economy as a
whole mentioned in Article 28(1)(f) of the MMF Regulation, guidance on this item should not be prescriptive because the choice of hypothetical macro systemic shocks will depend to a large extent on the latest developments in the market.
47. However, ESMA is of the view that managers could use an adverse scenario in relation
to the GDP. Managers could also replicate macro systemic shocks that affected the economy as a whole in the past.
48. Examples of such global stress test scenarios that the manager could consider are
provided in Appendix.
4.8 Guidelines on the establishment of additional common reference
stress test scenarios (the results of which should be included in the reporting template mentioned in Article 37(4) of the MMF Regulation)
49. In addition to the stress tests managers of MMFs conduct taking into account sections
4.1 to 4.7 of these guidelines, managers of MMFs should conduct the following
common reference stress test scenarios. the results of which should be included in the reporting template mentioned in Article 37(4) of the MMF Regulation.

4.8.1 Level of changes of liquidity
50. With respect to the level of changes of liquidity of the assets mentioned in Article
28(1)(a) of the MMF Regulation:

• Managers of MMFs should apply the discount factors specified in section 5 of the
  guidelines3 to reflect the increase in liquidity premia due to deterioration of market liquidity conditions in a stress scenario.
• For each relevant transferable security, the discount factors should be applied to the
  price used for the valuation of the fund at the time of the reporting (𝐕𝐏𝐫𝐢𝐜𝐞) in accordance with Article 29(3)(a), according to their type and maturity, to derive an adjusted price (𝐕𝐏𝐫𝐢𝐜𝐞𝐚𝐝𝐣):
  𝐕𝐏𝐫𝐢𝐜𝐞𝐚𝐝𝐣 = (𝟏 − 𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭) ∗ 𝐕𝐏𝐫𝐢𝐜𝐞
• The impact of the liquidity discount should be evaluated for the following assets:
  Sovereign Bonds, Corporate Bonds, Commercial Papers, ABCPs and eligible securitisations.
• The manager of the MMF should estimate the impact of the potential losses by valuing
  the investment portfolio at the derived adjusted price, 𝐕𝐏𝐫𝐢𝐜𝐞𝐚𝐝𝐣, to determine the stressed NAV and calculate the impact as a percentage of the reporting NAV:
  𝐀𝐬𝐬𝐞𝐭 𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐫𝐢𝐬𝐤 𝐢𝐦𝐩𝐚𝐜𝐭 (%) = 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 − 𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 Notes:
  The following assets should be stressed:
• Sovereign bonds, with a break down at country level;
• Corporate bonds, distinguishing at least between investment grade and high yield
  instruments;
• Commercial Papers, ABCPs and eligible securitisations, using the corporate bond
  parameters.
  The calibration is available in section 5 of the Guidelines.
  3 The discount factor is calibrated on bid-ask spreads.

4.8.2 Level of change of credit risk
51. With respect to the levels of change of credit risk of the assets held in the portfolio of
the MMF, including credit events and rating events, in accordance with Article 28(1)(b) of the MMF Regulation:
1) Credit spread stress test
52. Managers of MMFs should measure the impact of an increase in credit spread,
according to the following specifications:

• For each security, the increase in spread specified in section 5 of the guidelines should
  be applied.
• For each security, the corresponding change in spread should be translated into a
  haircut.
• The impact of the cumulated haircuts in percentage of reporting NAV should be
  calculated.
  𝐂𝐫𝐞𝐝𝐢𝐭 𝐫𝐢𝐬𝐤 𝐢𝐦𝐩𝐚𝐜𝐭 (%) =
  𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 − 𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕
  2) Concentration stress test

53. Managers of MMFs should also simulate the default of their two main exposures. The
    resulting impact on NAV should then be calculated, expressed as a percentage:
    𝐂𝐨𝐧𝐜𝐞𝐧𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐫𝐢𝐬𝐤 𝐢𝐦𝐩𝐚𝐜𝐭 (%) = 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 − 𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 Notes:
    The concentration risk scenario depends on the characteristics of the exposure. The collateral (or any other mitigant, e.g. credit derivatives) received should be considered. If there is no collateral, or if the collateral is insufficient to cover the exposure, the following loss given default should apply:

• Senior exposures: 45 %;
• Subordinated exposures: 75 %.
  The calibration is available in section 5 of the Guidelines.

4.8.3 Levels of change of the interest rates and exchange rates and levels of
widening or narrowing of spreads among indices to which interest rates of portfolio securities are tied
54. With respect to the levels of change of the interest rates and exchange rates referred
to in Article 28(1)(c) of the MMF Regulation, managers of MMFs should apply the following stressed market parameters using the parameters specified in section 5 of the guidelines in respect of (a) interest rate yield shocks which correspond to movements of the interest rates; and (b)FX shocks which corresponds to movements of the exchange rates.
1) Levels of change of the interest rates
55. With respect to the levels of change of the interest rates, managers of MMFs should
use the same reference rate curve for all instruments denominated in a given currency and the reference rate tenor should align with the residual maturity of the instrument. For floating rate instruments, instruments may be contractually linked to a particular reference rate, in which case this rate is considered moving in parallel with the reference rate curve. If the table does not provide the tenor corresponding to the residual maturity of the instrument, managers of MMFs should use the most appropriate parameter in the table (e.g. the closest).
2) Levels of change of the exchange rates
56. With respect to the levels of change of the exchange rates, two scenarios should be
used in the calculations: appreciation of the EUR against the USD; depreciation of the EUR against the USD.
3) Levels of widening or narrowing of spreads among indices to which interest rates of
portfolio securities are tied
57. With respect to the levels of widening or narrowing of spreads among indices to which
interest rates of portfolio securities are tied referred to in Article 28(1)(e) of the MMF Regulation, managers of MMFs should apply stressed market parameters, according to the following specifications:

• Managers of MMFs should use the parameters specified in section 5 of the guidelines.
• For instruments not tied to a specific index, managers of MMFs shall use the reference
  rate curve provided for the change of the interest rates scenario.
• If the table does not provide the tenor corresponding to the residual maturity of the
  instrument, managers of MMFs should use the most appropriate parameter in the table (e.g. the closest).

4. Results

58. Managers of MMFs should revaluate their portfolio considering the new parameters
    separately: interest rates, exchange rates, benchmark rates. They should express the impact of each risk factor as a percentage of NAV by calculating the following:
    𝐑𝐢𝐬𝐤 𝐟𝐚𝐜𝐭𝐨𝐫 𝐢𝐦𝐩𝐚𝐜𝐭 (%) =
    𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 − 𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 Notes:
    The calibration is available in section 5 of the Guidelines.

4.8.4 Levels of redemption
59. With respect to the levels of redemption referred to in Article 28(1)(d) of the MMF
Regulation, managers of MMFs should apply the following stressed redemption scenarios: a reverse liquidity stress test, a weekly liquidity stress test and a concentration stress test.
1) Reverse liquidity stress test
60. The reverse liquidity stress test comprises the following steps:

• For each asset, managers of MMFs should measure the weekly tradable amount
  (including maturing assets).
• Managers of MMFs should measure the maximum weekly tradable amount that can be
  liquidated with the portfolio allocation still being in line with all regulatory requirements of the MMF without distorting the portfolio allocation. 𝐑𝐞𝐬𝐮𝐥𝐭 (%) = 𝐌𝐚𝐱𝐢𝐦𝐮𝐦 𝐰𝐞𝐞𝐤𝐥𝐲 𝐭𝐫𝐚𝐝𝐚𝐛𝐥𝐞 𝐚𝐦𝐨𝐮𝐧𝐭 𝐭𝐡𝐚𝐭 𝐜𝐚𝐧 𝐛𝐞 𝐥𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐞𝐝 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐝𝐢𝐬𝐭𝐨𝐫𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐍𝐀𝐕 Notes:
• For each asset, the weekly tradable amount shall be based on the manager’s
  assessment of the fund’s portfolio that is capable of being liquidated within one week. Such assignment should be based on the shortest period during which such a position could reasonably be liquidated at or near its carrying value4 .
• The maximum size of outflows the fund can face in one week without distorting
  the portfolio allocation is determined by (1) the sum of the weekly tradable amounts; and (2) the fund’s capacity to comply with the regulatory requirements.
• For these purposes, the regulatory requirements are not limited to but should
  include at least:
  o Diversification (Article 17 of the MMF Regulation); o Concentration (Article 18 of the MMF Regulation); o Portfolio rules for short-term MMFs (Article 24 of the MMF Regulation) and for standard MMFs (Article 25 of the MMF Regulation), in particular, For its definition, see the Guidelines on reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of the AIFMD

Maximum weighted average maturity (WAM); Maximum weighted average life (WAL), daily maturing assets; and weekly maturing assets.

• For example, if 50% of a LVNAV MMF assets are tradable within a week but its
  WAM becomes higher than 60 days after selling 30%, the manager should report 30%. The calibration is available in section 5 of the Guidelines.

2. Weekly liquidity stress test:

61. The weekly liquidity stress test assesses the fund’s capacity to meet outflows with
    available weekly liquid assets, considered as the sum of highly liquid assets and weekly maturing assets and comprises the following steps:

• managers of MMFs should apply a stressed redemption scenario where the fund
  receives net weekly redemption requests from 25% of the professional investors and 15% of the retail investors.

• managers of MMFs should measure available weekly liquid assets to meet the
  redemption requests according to the following table:
  Assets Article CQS
  Assets referred to in Article 17(7)5 of the MMF Regulation which are highly liquid and can be redeemed and settled within one working day and have a residual maturity of up to 190 days. 24 (e) 1 Cash which is able to be withdrawn by giving prior notice of five working days without penalty. 24 (e) 25 (d) Weekly maturing assets 24 (e) 25 (d) Reverse repurchase agreements which are able to be terminated by giving prior notice of five working days 24 (e) 25 (d) x100% = Weekly liquid assets (bucket 1) Assets referred to in Article 17(7) of the MMF Regulation which can be redeemed and settled within one working week. 17(7) 1,2 Money market instruments or units or shares of other MMFs which they are able to be redeemed and settled within five working days. 24 (e) 25 (e) 1,2 Eligible securitisations and asset-backed commercial paper (ABCPs). 9(1)(b) 1 x85% = Weekly liquid assets (bucket 2) 5 Money market instruments issued or guaranteed separately or jointly by the Union, the national, regional and local administrations of the Member States or their central banks, the European Central Bank, the European Investment Bank, the European Investment Fund, the European Stability Mechanism, the European Financial Stability Facility, a central authority or central bank of a third country, the International Monetary Fund, the International Bank for Reconstruction and Development, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the Bank for International Settlements, or any other relevant international financial institution or organisation to which one or more Member States belong.

• Managers of MMFs should calculate the coverage of outflows by weekly liquid assets
  as a percentage in the following way:
  𝐑𝐞𝐬𝐮𝐥𝐭 (%) =
  𝐖𝐞𝐞𝐤𝐥𝐲 𝐥𝐢𝐪𝐮𝐢𝐝 𝐚𝐬𝐬𝐞𝐭𝐬
  𝐖𝐞𝐞𝐤𝐥𝐲 𝐨𝐮𝐭𝐟𝐥𝐨𝐰𝐬
  Notes:

• Weekly liquid assets are classified in two buckets (bucket 1 and 2) according to
  their category and credit quality. CQS refers to “Credit Quality Steps”, within the meaning of the COMMISSION IMPLEMENTING REGULATION (EU) 2016/17996 .

• The sum of the weighted weekly liquid assets will be expressed in percentage of
  the redemption shock. For example, if a fund meets a redemption shock of 30% with 20% of bucket 1 liquid assets and 45% of total weekly liquid assets (buckets 1 and 2), the manager should report the ratio (Weekly liquid assets)/(Weekly outflows) as a result:
  o 20%/30% = 67% (bucket 1); and o 45%/30% = 150% (bucket 1 and 2).

• It is important to note that the liquidity of any asset classes should always be
  checked in an appropriate manner. If there is any doubt regarding the liquidity of a security, managers of MMFs should not include it in the weekly liquid assets. The calibration is available in section 5 of the Guidelines.

3. Concentration stress test

62. The concentration stress test is a scenario where the MMF faces redemption requests
    from its two main investors. The impact of the stress test should be assessed according to weekly liquidity stress test methodology. 𝐑𝐞𝐬𝐮𝐥𝐭 (%) = 𝐖𝐞𝐞𝐤𝐥𝐲 𝐥𝐢𝐪𝐮𝐢𝐝 𝐚𝐬𝐬𝐞𝐭𝐬 𝐈𝐧𝐯𝐞𝐬𝐭𝐞𝐝 𝐚𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐭𝐰𝐨 𝐦𝐚𝐢𝐧 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬 Note:
    The calibration is available in section 5 of the Guidelines.
    6 https://eur-lex.europa.eu/legal￾content/EN/TXT/?toc=OJ%3AL%3A2016%3A275%3ATOC&uri=uriserv%3AOJ.L_.2016.275.01.0003.01.ENG

4.8.5 Macro-systemic shocks affecting the economy as a whole
63. With respect to the identification of macro-systemic shocks affecting the economy as a
whole referred to in Article 28(1)(f) of the MMF Regulation, managers of MMFs should take the following steps:

• measure the impact of a market shock combining different risk parameters in
  accordance with the table below;
• assess the impact of a redemption shock following the market shock. Assets sold in
  response to the redemption shock will result in additional losses, as defined in the liquidity stress test;
• calculate the result as a percentage of NAV;
• calculate the value of weekly liquid assets after market shock as a percentage of
  outflows. ;
  Risk factors Parameters used for the calibration Market shock
• FX Rate • EUR/USD etc.
• Interest Rate
• Credit
• Spread among indices to which
  interest rates of portfolio securities are tied
• Swap rate
• Gov. bond yields/ spreads
• Corp. bond yields/ spreads
  Redemption shock
• Level of Redemption
• Asset liquidity
• % outflows
• Bid/ask spread (discount
  factor)
  Results
• % NAV
• Weekly liquid assets/ outflows
  Memo • % outflows
  Notes:
  The scenario envisages the following circumstances:
• The MMF is affected by a shock combining an adverse FX shock and an increase
  in interest rates including swap rate, government bond yields and corporate bond yields. The credit risk is included in the yield shock. Managers of MMFs should

use their internal models to measure the combined impact. The calibration of the shock is based on a macro scenario provided by ESMA and the ESRB and combining shocks from the other scenarios.

• In the wake of the market shock, investors ask for redemption. Outflows are
  calculated similarly to the redemption scenario by differentiating professional and retail investors, i.e. 15% from retail investors and 25% from professional investors.
• To meet the redemption requests, the fund sells assets in a stressed environment
  characterized by a widening of bid-ask spread as characterized in the liquidity stress test. For the purposes of the stress test, the loss is entirely borne by remaining investors (and not by redeeming investors).
• The impact on the NAV is the result of the market shock, the outflows and the
  liquidity shock.
• The impact on liquidity is calculated using the weekly liquidity stress test
  methodology.
  The calibration is available in section 5 of the Guidelines.

5. Calibration for 2019
64. The following section includes the 2019 calibration for the MMF stress tests the results
of which have to be reported in accordance with Article 37 of the MMF Regulation, and which are detailed in section 4.8 above.
65. If managers need a parameter that is not indicated in this section, they may consult the
adverse scenario on the ESRB website7
.
7 https://www.esrb.europa.eu/mppa/stress/shared/pdf/esrb.stress_test190402_EIOPA_insurance~c5c17193da.en.pdf?172d96eff 093ab8ed90c18efd3cf979f

5.1. Common reference parameters of the stress test scenarios in relation to hypothetical changes
in the level of liquidity of the assets held in the portfolio of the MMF MMFR Typical assets Liquidity Eligible assets Stressed Parameters (a) money market instruments -Certificate of deposit (CD) Yes Table 3 -Commercial Paper (CP) Yes Table 3 -Government bonds, treasury and local authority bills Yes Table 1,2 -Corporate bonds Yes Table 3 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -Eligible securitisations Yes Table 3 -ABCPs Yes Table 3 (c) deposits with credit institutions -Deposits, of which time deposits No (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market No -Financial derivative instruments dealt OTC No (e) repurchase agreements -Repos No (f) reverse repurchase agreements -Reverse repos No (g) units or shares of other MMFs -Shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs

Table 1 Table 2
Liquidity discount factor - Sovereign bonds by residual maturity - Reference countries (in %) Liquidity discount factor - Sovereign bonds by rating and residual maturity (in %) 3M 6M 1Y 1.5Y 2Y 3M 6M 1Y 1.5Y 2Y DE 0.06 0.14 0.20 AAA 0.05 0.09 0.18 0.19 0.20 ES 0.23 0.44 0.70 0.72 0.75 AA 0.07 0.18 0.32 0.42 0.53 FR 0.05 0.10 0.19 0.24 0.30 A 0.13 0.25 0.70 0.72 0.75 IT 0.47 0.62 0.63 0.64 0.65 BBB 0.47 0.55 0.70 0.72 0.75 NL 0.04 0.04 0.15 0.18 0.20 Below BBB or unrated 0.61 0.72 0.82 0.94 0.98
Table 3
Liquidity discount factor - Corporate bonds by rating and residual maturity (in %) 3M 6M 1Y 1.5Y 2Y AAA 0.15 0.28 0.56 0.60 0.64 AA 0.23 0.56 1.02 1.35 1.69 A 0.43 0.79 2.24 2.32 2.40 BBB 1.50 1.77 2.24 2.32 2.40 Below BBB or unrated 1.96 2.30 2.91 2.95 2.99

5.2. Common reference parameters of the stress test scenarios in relation to hypothetical changes
in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events MMFR Typical assets Credit (credit spreads) Credit (2 main counterparties) Eligible assets Stressed Parameters Stressed Parameters (a) money market instruments -Certificate of deposit (CD) Yes Table 5 Yes Table 6 -Commercial Paper (CP) Yes Table 5 Yes Table 6 -Government bonds, treasury and local authority bills Yes Table 4 Yes Table 6 -Corporate bonds Yes Table 5 Yes Table 6 (b) eligible securitisations and asset￾backed commercial paper (ABCPs) -Eligible securitisations Yes Table 5 Yes Table 6 -ABCPs Yes Table 5 Yes Table 6 (c) deposits with credit institutions -Deposits, of which time deposits No No (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market No No -Financial derivative instruments dealt OTC No No (e) repurchase agreements -Repos No No (f) reverse repurchase agreements -Reverse repos No No (g) units or shares of other MMFs -Shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs

Table 4: Shocks to government bond credit spreads
Credit Spread by residual maturity - Government bonds (basis points) Geographic Area Country 3M 6M 1Y 2Y EU Austria 12 13 16 20 EU Belgium 11 12 14 22 EU Croatia 3 4 EU Cyprus 49 55 71 71 EU Czech Republic 85 95 125 125 EU Denmark 12 13 16 17 EU Finland 8 8 9 13 EU France 13 14 17 23 EU Germany 5 EU Greece 67 75 98 114 EU Hungary 69 77 101 121 EU Ireland 56 62 81 84 EU Italy 58 65 85 102 EU Latvia 3 19 EU Lithuania 9 9 11 24 EU Malta 24 26 33 41 EU Netherlands 9 10 12 15 EU Poland 85 95 125 125 EU Portugal 23 25 31 66 EU Romania 23 26 32 48 EU Slovakia 21 23 30 34 EU Slovenia 35 39 50 58 EU Spain 65 73 95 113 EU Sweden 42 46 60 60 EU United Kingdom 38 42 54 79 EA (weighted averages) EA (weighted averages) 25 27 35 42 EU (weighted averages) EU (weighted averages) 30 33 42 44 EEA EEA (including Switzerland) 30 33 42 44 US United States 44 48 61 75 JP Japan 85 95 127 141 Other advanced economies Other advanced economies 42 52 77 78 Emerging markets Emerging markets 50 85 161 161

Table 5: Shocks to corporate bond and ABS credit spreads (all maturities)
Corporate credit spreads (basis points)
Rating Non-financial Financial covered Financial ABS AAA 39 44 57 76 AA 40 52 63 96 A 41 113 124 116 BBB 66 163 180 160 BB 78 188 204 208 B 91 213 234 238 Below B or unrated 103 237 269 270
Table 6: Loss given default
Loss given default (%)
Senior exposure 45
Subordinated exposure 75

5.3. Common reference parameters of the stress test scenarios in relation to hypothetical
movements of the interest rates
MMFR
Typical assets
IR
(Interest rate swap)
Eligible assets Stressed Parameters
(a) money market instruments
-Certificate of deposit (CD) Yes Table 6, 7
-Commercial Paper (CP) Yes Table 6, 7
-Government bonds, treasury and local authority bills Yes Table 6, 7 -Corporate bonds Yes Table 6, 7 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -Eligible securitisations Yes Table 6, 7 -ABCPs Yes Table 6, 7 (c) deposits with credit institutions -Deposits, of which time deposits Yes Table 6, 7 (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market Yes Table 6, 7 -Financial derivative instruments dealt OTC Yes Table 6, 7 (e) repurchase agreements -Repos No (f) reverse repurchase agreements -Reverse repos Yes Table 6, 7 (g) units or shares of other MMFs -Shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs

Table 6: Shocks to swap rates
Interest rate yield shocks absolute changes (basis points) Geographic Area Country Description 1M 3M 6M 1Y 2Y EU Euro Area Interest rate SWAP on the EUR (Euro) 53 53 60 80 71 EU Croatia Interest rate SWAP on the HRK (Croatian Kuna) 53 53 60 80 71 EU Czech Republic Interest rate SWAP on the CZK (Czech Koruna) -4 -5 3 EU Denmark Interest rate SWAP on the DKK (Danish Krone) 53 53 60 80 71 EU Hungary Interest rate SWAP on the HUF (Hungarian Forint) 74 74 83 111 119 EU Poland Interest rate SWAP on the PLN (Polish Zloty) 25 25 28 37 53 EU Romania Interest rate SWAP on the RON (Romanian Leu) 153 153 172 229 217 EU Sweden Interest rate SWAP on the SEK (Swedish Krona) 26 26 30 40 55 EU United Kingdom Interest rate SWAP on the GBP (British Pound) 98 98 110 146 130 Rest of Europe Norway Interest rate SWAP on the NOK (Norwegian Krone) 20 20 22 30 39 Rest of Europe Russia Interest rate SWAP on the RUB (Russian Ruble) 122 122 137 183 184 Rest of Europe Switzerland Interest rate SWAP on the CHF (Swiss Franc) 31 31 35 46 54

Rest of Europe Turkey Interest rate SWAP on the TRY (Turkish Lira) 197 197 221 295 307 North America Canada Interest rate SWAP on the CAD (Canadian Dollar) 46 46 51 68 70 North America US Interest rate SWAP on the USD (US Dollar) 93 93 105 140 125 Australia and Pacific Australia Interest rate SWAP on the AUD (Australian Dollar) 33 33 37 50 62 South and central America Chile Interest rate SWAP on the CLP (Chilean Peso) 206 206 232 309 376 South and central America Colombia Interest rate SWAP on the COP (Colombian Peso) 162 162 183 243 276 South and central America Mexico Interest rate SWAP on the MXN (Mexican Peso) 245 245 276 368 360 Asia China Interest rate SWAP on the CNY (Chinese Yuan) 13 13 14 19 17 Asia Hong Kong Interest rate SWAP on the HKD (Hong Kong Dollar) 208 208 235 313 320 Asia India Interest rate SWAP on the INR (Indian Rupee) 263 263 296 395 394 Asia Japan Interest rate SWAP on the JPY (Japanese Yen) 9 9 10 14 19 Asia Korea Interest rate SWAP on the KRW (South Korean Won) 134 134 150 200 209 Asia Malaysia Interest rate SWAP on the MYR (Malaysian Ringgit) 90 90 101 134 153 Asia Singapore Interest rate SWAP on the SGD (Singapore Dollar) 116 116 130 173 176 Asia Thailand Interest rate SWAP on the THB (Thai Baht) 164 164 184 245 257 Africa South Africa Interest rate SWAP on the ZAR (South African Rand) 10 10 11 14 25

Table 7 Shocks to swap rates (default values for countries not included in table 6)
Interest rate yield shocks absolute changes (basis points) Geographic Area Description 1M 3M 6M 1Y 2Y EU Default value for countries not included in table 6 59 59 66 89 88 Other advanced economies Default value for countries not included in table 6 39 39 44 59 66 Other emerging markets Default value for countries not included in table 6 231 231 260 346 363

5.4. Common reference parameters of the stress test scenarios in relation to hypothetical
movements of the exchange rates
MMFR
Typical assets
FX
(Appreciation of the EUR)
FX
(Depreciation of the EUR)
Eligible assets Stressed Parameters Stressed Parameters (a) money market instruments -Certificate of deposit (CD) Yes Table 8 Yes Table 9 -Commercial Paper (CP) Yes Table 8 Yes Table 9 -Government bonds, treasury and local authority bills Yes Table 8 Yes Table 9 -Corporate bonds Yes Table 8 Yes Table 9 (b) eligible securitisations and asset￾backed commercial paper (ABCPs) -Eligible securitisations Yes Table 8 Yes Table 9 -ABCPs Yes Table 8 Yes Table 9 (c) deposits with credit institutions -Deposits, of which time deposits Yes Table 8 Yes Table 9 (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market Yes Table 8 Yes Table 9 -Financial derivative instruments dealt OTC Yes Table 8 Yes Table 9 (e) repurchase agreements -Repos No No (f) reverse repurchase agreements -Reverse repos Yes Table 8 Yes Table 9 (g) units or shares of other MMFs -Shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs

Table 8
FX shocks (appreciation of the EUR against the USD) relative changes (%) Geographic Area Description Exchange rate name Shock EU USDBGN represents 1 USD per x BGN (Bulgarian Lev) USDBGN -25.4 EU EURCZK represents 1 EUR per x CZK (Czech Koruna) EURCZK -2.2 EU EURGBP represents 1 EUR per x GBP (British Pound) EURGBP 11.1 EU EURHRK represents 1 EUR per x HRK (Croatian Kune) EURHRK 0.1 EU EURHUF represents 1 EUR per x HUF (Hungarian Forints) EURHUF -5.2 EU USDNOK represents 1 USD per x NOK (Norwegian Krone) USDNOK -23.2 EU EURPLN represents 1 EUR per x PLN (Polish Zloty) EURPLN -1.5 EU EURRON represents 1 EUR per x RON (Romanian Leu ) EURRON 0.0 EU EURRSD represents 1 EUR per x RSD (Serbian Dinar ) EURRSD -1.9 EU USDSEK represents 1 USD per x SEK (Swedish Krona) USDSEK -25.4 Rest of Europe EURCHF represents 1 EUR per x CHF (Swiss Franc) EURCHF 3.7 Rest of Europe EURRUB represents 1 EUR per x RUB (Russian Ruble) EURRUB 10.1 Rest of Europe EURTRY represents 1 EUR per x TRY (Turkish Lira) EURTRY 13.5 North America USDCAD represents 1 USD per x CAD (Canadian dollar) USDCAD -13.0 North America EURUSD represents 1 EUR per x USD (US Dollar) EURUSD 25.4 Australia and Pacific AUDUSD represents 1 AUD per x USD (Australian Dollar) AUDUSD 17.5 Australia and Pacific NZDUSD represents 1 NZD per x USD (New Zealand Dollar) NZDUSD 18.0 South and central America USDARS represents 1 USD per x ARS (Argentine Peso) USDARS -0.8 South and central America USDBRL represents 1 USD per x BRL (Brazilian Real) USDBRL -12.2 South and central America USDMXN represents 1 USD per x MXN (Mexican Peso) USDMXN -7.9 Asia USDCNY represents 1 USD per x CNY (Chinese Yuan Renminbi) USDCNY -0.7 Asia USDHKD represents 1 USD per x HKD (Hong Kong Dollar) USDHKD -0.1 Asia USDINR represents 1 USD per x INR (Indian Rupee) USDINR -2.5 Asia USDJPY represents 1 USD per x JPY (Japanese Yen) USDJPY -8.7 Asia USDKRW represents 1 USD per x KRW (South Korean Won) USDKRW -2.1 Asia USDMYR represents 1 USD per x MYR (Malaysian Ringgit) USDMYR -2.3 Asia USDSGD represents 1 USD per x SGD (Singapore Dollar) USDSGD -10.4 Asia USDTHB represents 1 USD per x THB (Thai Baht) USDTHB -2.3 Africa USDZAR represents 1 USD per x ZAR (South African Rand) USDZAR -14.0

Table 9
FX shocks (depreciation of the EUR against the USD) relative changes (%) Geographic Area Description Exchange rate name Shock EU USDBGN represents 1 USD per x BGN (Bulgarian Lev) USDBGN 17.0 EU EURCZK represents 1 EUR per x CZK (Czech Koruna) EURCZK 2.4 EU EURGBP represents 1 EUR per x GBP (British Pound) EURGBP -6.5 EU EURHRK represents 1 EUR per x HRK (Croatian Kune) EURHRK -0.4 EU EURHUF represents 1 EUR per x HUF (Hungarian Forints) EURHUF 4.0 EU USDNOK represents 1 USD per x NOK (Norwegian Krone) USDNOK 17.7 EU EURPLN represents 1 EUR per x PLN (Polish Zloty) EURPLN 3.6 EU EURRON represents 1 EUR per x RON (Romanian Leu ) EURRON 0.8 EU EURRSD represents 1 EUR per x RSD (Serbian Dinar ) EURRSD -1.5 EU USDSEK represents 1 USD per x SEK (Swedish Krona) USDSEK 18.4 Rest of Europe EURCHF represents 1 EUR per x CHF (Swiss Franc) EURCHF -3.6 Rest of Europe EURRUB represents 1 EUR per x RUB (Russian Ruble) EURRUB -9.6 Rest of Europe EURTRY represents 1 EUR per x TRY (Turkish Lira) EURTRY -5.5 North America USDCAD represents 1 USD per x CAD (Canadian dollar) USDCAD 8.9 North America EURUSD represents 1 EUR per x USD (US Dollar) EURUSD -17.0 Australia and Pacific AUDUSD represents 1 AUD per x USD (Australian Dollar) AUDUSD -13.3 Australia and Pacific NZDUSD represents 1 NZD per x USD (New Zealand Dollar) NZDUSD -13.6 South and central America USDARS represents 1 USD per x ARS (Argentine Peso) USDARS 1.3 South and central America USDBRL represents 1 USD per x BRL (Brazilian Real) USDBRL 9.1 South and central America USDMXN represents 1 USD per x MXN (Mexican Peso) USDMXN 7.1 Asia USDCNY represents 1 USD per x CNY (Chinese Yuan Renminbi) USDCNY 0.4 Asia USDHKD represents 1 USD per x HKD (Hong Kong Dollar) USDHKD 0.1 Asia USDINR represents 1 USD per x INR (Indian Rupee) USDINR 2.3 Asia USDJPY represents 1 USD per x JPY (Japanese Yen) USDJPY 4.5 Asia USDKRW represents 1 USD per x KRW (South Korean Won) USDKRW 3.0 Asia USDMYR represents 1 USD per x MYR (Malaysian Ringgit) USDMYR 1.5 Asia USDSGD represents 1 USD per x SGD (Singapore Dollar) USDSGD 6.1 Asia USDTHB represents 1 USD per x THB (Thai Baht) USDTHB 1.6 Africa USDZAR represents 1 USD per x ZAR (South African Rand) USDZAR 14.4

5.5. Common reference parameters of the stress test scenarios in relation to hypothetical widening
or narrowing of spreads among indexes to which interest rates of portfolio securities are tied MMFR Typical assets IR (Interest rate swap) Eligible assets Stressed Parameters (a) money market instruments -Certificate of deposit (CD) Yes Table 6, 7 -Commercial Paper (CP) Yes Table 6, 7 -Government bonds, treasury and local authority bills Yes Table 6, 7 -Corporate bonds Yes Table 6, 7 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -Eligible securitisations Yes Table 6, 7 -ABCPs Yes Table 6, 7 (c) deposits with credit institutions -Deposits, of which time deposits Yes Table 6, 7 (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market Yes Table 6, 7 -Financial derivative instruments dealt OTC Yes Table 6, 7 (e) repurchase agreements -Repos No (f) reverse repurchase agreements -Reverse repos Yes Table 6, 7 (g) units or shares of other MMFs -Shares issued by other MMFs Yes Extrapolation of the results to shares issued by other MMFs

5.6. Common reference parameters of the stress test scenarios in relation to hypothetical levels of
redemption
MMFR
Typical assets
Redemption
(reverse liquidity ST)
Redemption
(weekly liquidity ST
Redemption
(2 main investors)
Eligible assets Stressed Parameters Stressed Parameters Stressed Parameters (a) money market instruments -Certificate of deposit (CD) Yes Self￾assessment Yes Table 10, 11 Yes Table 10 -Commercial Paper (CP) Yes Self￾assessment Yes Table 10, 11 Yes Table 10 -Government bonds, treasury and local authority bills Yes Self￾assessment Yes Table 10, 11 Yes Table 10 -Corporate bonds Yes Self￾assessment Yes Table 10, 11 Yes Table 10 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -Eligible securitisations Yes Self￾assessment Yes Table 10, 11 Yes Table 10 -ABCPs Yes Self￾assessment Yes Table 10, 11 Yes Table 10 (c) deposits with credit institutions -Deposits, of which time deposits Yes Self￾assessment Yes Table 10, 11 Yes Table 10 (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market Yes Self￾assessment Yes Table 10, 11 Yes Table 10 -Financial derivative instruments dealt OTC Yes Self￾assessment Yes Table 10, 11 Yes Table 10 (e) repurchase agreements -Repos Yes Self￾assessment No Table 10, 11 No Table 10 (f) reverse repurchase agreements -Reverse repos Yes Self￾assessment Yes Table 10, 11 Yes Table 10 (g) units or shares of other MMFs -Shares issued by other MMFs Yes Self￾assessment Yes Table 10, 11 Yes Table 10

Table 10 Table 11
Assets Article CQS Net outflows (%)
Assets referred to in Article 17(7)[1] which are highly liquid and can be redeemed and settled within one working day and have a residual maturity of up to 190 days 24 (e) 1 Professional investor 25 Cash which is able to be withdrawn by giving prior notice of five working days without penalty 24 (e) Retail investor 15 25 (d) Weekly maturing assets 24 (e) 25 (d) Reverse repurchase agreements which are able to be terminated by giving prior notice of five working days 24 (e) 25 (d) x100% = Weekly liquid assets (bucket 1) Assets referred to in Article 17(7) which can be redeemed and settled within one working week 17(7) 1,2 Money market instruments or units or shares of other MMFs which they are able to be redeemed and settled within five working days 24 (e) 1,2 25 (e) Eligible securitisations and asset-backed commercial paper (ABCPs) 9(1)(b) 1 x85% = Weekly liquid assets (bucket 2)

5.7. Common reference parameters of the stress test scenarios in relation to hypothetical macro
systemic shocks affecting the economy as a whole MMFR Typical assets Macro Eligible assets Stressed Parameters (a) money market instruments -Certificate of deposit (CD) Yes Tables 1,2,3,4,5,6,7,8,10,11 -Commercial Paper (CP) Yes Tables 1,2,3,4,5,6,7,8,10,11 -Government bonds, treasury and local authority bills Yes Tables 1,2,3,4,5,6,7,8,10,11 -Corporate bonds Yes Tables 1,2,3,4,5,6,7,8,10,11 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -Eligible securitisations Yes Tables 1,2,3,4,5,6,7,8,10,11 -ABCPs Yes Tables 1,2,3,4,5,6,7,8,10,11 (c) deposits with credit institutions -Deposits, of which time deposits Yes Tables 1,2,3,4,5,6,7,8,10,11 (d) financial derivative instruments -Financial derivative instruments dealt in on a regulated market Yes Tables 1,2,3,4,5,6,7,8,10,11 -Financial derivative instruments dealt OTC Yes Tables 1,2,3,4,5,6,7,8,10,11 (e) repurchase agreements -Repos No Tables 1,2,3,4,5,6,7,8,10,11 (f) reverse repurchase agreements -Reverse repos Yes Tables 1,2,3,4,5,6,7,8,10,11 (g) units or shares of other MMFs -Shares issued by other MMFs Yes Tables 1,2,3,4,5,6,7,8,10,11

6. Appendix
   A.
   Example of stress combining the various factors mentioned in sections 4.2 to 4.7 with investors’ redemption requests A practical example of one possible implementation of the section “Combination of the various factors mentioned in the following sections 4.2 to 4.7 with investors’ redemption requests” is given below. The table below estimates the losses incurred by the MMF in the event of redemptions or market stress (credit or interest rate shocks). First scenario: credit premium shock of 25 bps Second scenario: interest rate shock of 25 bps Three largest investors (25%) ↓ Very stable investors (15%) ↓ Redemptions 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Initial portfolio 2 bps 3 bps 5 bps 6 bps 8 bps 9 bps 11 bps bps First scenario 7 bps 9 bps 13 bps bps bps bps bps bps bps bps Second scenario 3 bps 4 bps 6 bps 9 bps 12 bps bps bps bps bps bps WAL (days) 105 117 131 149 169 192 219 249 290 320 This stress test shows that a redemption by the three largest investors (25% of net assets) would push the weighted average life (WAL) beyond the 120-day regulatory threshold (for a short-term money market fund) and cause the portfolio to lose in the region of 2-3 bps under normal conditions. The same level of cumulative redemptions with a 25 bps rise in credit premium would cause a loss of around 13-18 bps. B.

Example of Redemptions based on an investor behaviour model, in accordance with the breakdown of liabilities by investor category. This implies the simulation of the behaviour of each type of investor and establishes a simulation based on the composition of the liabilities of the MMF. Example of investor classification and simulation of their behaviour (the figures shown are not real): Investor type Record redemptions for this investor type Over one day Over one week Over one month Large institutional 25% 75% 100% Group entity (bank, insurance, own account) 20% 40% 40% Investment fund 20% 65% 100% Small institutional 10% 25% 40% Private banking network 15% 40% 75% Retail investor with distributor A 5% 10% 20% Retail investor with distributor B 7% 15% 20% Stressed redemptions for this investor category Large institutional 75% Group entity (bank, insurance, own account) 0% (in agreement with the AMC) Investment fund 65% Small institutional 25% Private banking network 40% Retail investor with distributor A 10% Retail investor with distributor B 15% In order to build such a simulation of this kind, the manager needs to make assumptions about the behaviour of each investor type, based in part on historical redemptions. In the example above, the manager has noted that the retail investors who invested through distributor A are historically slower to exit in the event of difficulty, but that they exhibit the same behaviour over one month as retail investors who invested through distributor B. This fictitious example shows a possible classification that the manager may use based on the data available on the liabilities of the MMF and the behaviour of its investors. C.
66. Examples of global stress test scenarios that the manager could consider:
67.

i. the Lehman Brothers’ event with the calibration of all relevant factors one month
ahead of the failure of this firm;
ii. A) a scenario including a combination of the 3 following factors: i) a parallel shift in
interest rate (x) ii) a shift in credit spreads (y) and iii) a redemption stress (z));
iii. B) a scenario including a combination of the 3 following factors: i) a parallel shift in
interest rate (x) ii) a shift in credit spreads (y) and iii) a redemption stress (z)) Variables x, y and z being the worst figures/shifts experienced by the fund, on an independent basis, for the last 12 months.