Regulatory Alerts2017-12-07
Added · Updated
Recommendation of the European Systemic Risk Board on liquidity and leverage risks in investment funds
The European Systemic Risk Board recommends that the European Commission propose legislative changes to allow investment funds to incorporate additional liquidity management tools, such as redemption gates and swing pricing, and to limit liquidity transformation in open-ended alternative investment funds. ESMA is tasked with developing guidance on liquidity stress testing practices for fund managers and establishing a framework for assessing and calibrating macroprudential leverage limits under Directive 2011/61/EU. The document also mandates a harmonized reporting framework requiring UCITS and their management companies to regularly report data on liquidity risk and leverage to national competent authorities, ESMA, and the ESRB. Compliance reports regarding these measures are due by 30 June 2019 for ESMA guidance and by 31 December 2020 for legislative implementation actions.