The European Securities and Markets Authority (“ESMA”) has recently published two guidelines regarding the stress testing of money market funds and reporting on money market funds to national competent authorities. These guidelines were published in order to ensure a coherent application of Regulation (EU) 2017/1131 (the “Money Market Fund Regulation”).
Guidelines on Stress Testing
The Guidelines on the stress testing of money market funds establish common reference parameters of the stress test scenarios that Money Market Funds (“MMFs”) or their managers should include while conducting their stress tests. These stress test scenarios include hypothetical changes in liquidity levels, credit and interest rates risks and redemption levels.
MMFs and their managers shall measure the impact of these scenarios and include them in the reporting template together with their first quarterly reports for Quarter 1 of 2020.
Guidelines on Reporting
The Guidelines on reporting provide guidance on how the reporting template on money market funds should be completed. This reporting template should be transmitted by the managers of MMFs as from Quarter 1 of 2020, and which report would also include the result of stress tests. The current guidelines include the calibration of the stress test scenarios for 2019.These guidelines will be updated annually, and the Malta Financial Services Authority will be providing more details on the submission form and format.
Please feel free to contact us if you require more information on the stress test scenarios and reporting.