November 17, 2017

ESMA published a final report on the Money Market Funds Regulation (MMFR). The final report contains final versions of the technical advice, implementing technical standards, and guidelines on stress test scenarios carried out by money market fund (MMF) managers under the MMFR.

The key requirements relate to asset liquidity and credit quality, the establishment of a reporting template, and stress test scenarios carried out by MMF managers. The key requirements under the different policy tools are as follows:

  • Technical Advice covers the liquidity and credit quality requirements applicable to assets received as part of a reverse repurchase agreement. It also covers the criteria for validation of the credit quality assessment methodologies and the criteria for quantification of the credit risk and the relative risk of default of an issuer and of the instrument in which the MMF invests, along with the criteria to establish qualitative indicators on the issuer of the instrument
  • Implementing Technical Standards address the development of a reporting template containing all the information managers of MMFs are required to send to the competent authority of the MMF, including on the characteristics, portfolio indicators, assets, and liabilities of the MMF. This information will be submitted to the national competent authorities and then transmitted to ESMA. These standards shall enter into force on the twentieth day following that of their publication in the Official Journal of the European Union.
  • Guidelines address common reference parameters of the scenarios to be included in the stress tests that managers of MMFs are required to conduct. This takes into account such factors as hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF, movements of interest rates, and exchange rates or levels of redemption. Guidelines on stress tests scenarios under Article 28 of the MMF Regulation apply from the dates specified in articles 44 and 47 of the MMFR.

 

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Keywords: Europe, EU, Securities, MMFR, MMF, Stress Testing, ESMA

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