Throughout August you will have seen a number of regulators publishing updated circulars, opinions and notices in relation to the application of the ESMA Guidelines on stress test scenarios under the Money Market Fund Regulation (EU) 2017/1131 (MMFR). Including regulators such as the: MFSA, CMVM, Central Bank of Ireland, FSMA & CSSF.
IOSCO has launched a Thematic Review on the implementation of Liquidity Risk Management Recommendations. The Thematic Review aims to assess the extent to which the Recommendations have been implemented through member regulatory frameworks.
This week we return to our refresher series on liquidity risk rules around the world, and in particular, the rules in the United States. With the COVID-19 vaccine rollout well underway, and the end of crisis in sight, we thought we would look back at how the volatility last year caused by COVID impacted the US market and compliance with SEC liquidity rules.
Last week we took a brief look at the liquidity risk management regime in Hong Kong. This week, moving slightly southwest, and staying in the same continent, we review the liquidity risk requirements in Singapore. In 2018, the same year Hong Kong made amendments to its Fund Manager Code of Conduct, the Monetary Authority of Singapore (MAS) issued new Guidelines on Liquidity Risk Management Practices for Fund Management Companies (Guidelines).
Although liquidity risk management practices vary in different jurisdictions, in most cases, asset managers are required to monitor the liquidity of the fund on a frequent basis. Whilst many aspects of the regulations are broadly similar, differences can be seen from what is considered “liquid”, and around methodology to liquidity buckets, stress testing and reporting requirements. In Europe for example, neither UCITS nor AIFMD specify a specific methodology for calculating liquidity. This is in contrast to the US SEC Liquidity Risk Management Framework requirements which set out a specific methodology to be followed, although that methodology is not without its shortcomings.