ESMA has published two final reports including two separate sets of guidelines.22 July 2019
ESMA has published two final reports including two separate sets of guidelines it was mandated to produce under the EU’s Money Market Fund Regulation (“MMFR”). These are ESMA’s guidelines on stress test scenarios and ESMA’s guidelines on reporting to competent authorities applicable under the MMFR.
The guidelines on stress test scenarios cover:
- liquidity levels;
- credit and interest rate risks;
- redemptions levels;
- widening/ narrowing of spreads among indexes to which interest rates of portfolio securities are tied; and
- macro-economic shocks
ESMA intends to update the stress-testing guidelines at least annually, taking into account the latest market developments. ESMA first consulted on stress-testing as part of a broader consultation on MMFR implementation in May 2017. In its final report on that consultation, ESMA noted that further work would need to be undertaken on the establishment of common reference stress test scenarios and consulted on this in September 2018. ESMA has now concluded on that consultation and this latest publication updates the first set of stress-testing guidelines published in March 2018.
Under the MMFR, managers of money market funds are required to report to national regulators on at least a quarterly basis in relation to a range of information, including:
- type and characteristics of the MMF;
- portfolio indicators such as NAV, WAM, WAL, maturity breakdown, liquidity and yield;
- the results of the stress testing;
- information on assets held in the portfolio; and
- information on the liabilities of the MMF.
ESMA also originally consulted on the regulatory reporting requirements in May 2017 as part of the same broader consultation on MMFR implementation outlined above and issued a final reporton its proposed Implementing Technical Standards (“ITS”) on regulatory reporting in November 2017, which were endorsed and published by the Commission in April 2018. ESMA subsequently consulted in November 2018 on regulatory reporting guidelines to complement the ITS and the final reporting guidelines that have now been published conclude that consultation. ESMA has now also published Technical Reporting Instructions to accompany the ITS and reporting guidelines. The format of the MMF reports will use the ISO 20022 Standard currently used in the context of the MiFIR and EMIR reporting requirements.
ESMA has additionally clarified that MMF managers would need to send their first quarterly reports to national regulators by the end of Q1 2020. ESMA has also stated that there will be no requirement to retroactively provide historical data for any period prior to this starting date of the reporting.
These newly published reports will be considered by the Money Market Fund Working Group and Irish Funds will seek to engage with the Central Bank in relation to local implementation of the reporting requirements.