Launch of the ESMA supervisory exercise in relation to the ESRB Recommendation on Liquidity Risk in Investment Funds
As part of its actions to address the impact of COVID-19 on the financial system from a macroprudential perspective, the ESRB issued on 6 May 2020 a recommendation to ESMA to undertake together with national competent authorities a focused piece of supervisory engagement with those investment funds having significant exposure to corporate debt and real estate assets. For further information on the background of this work please refer to the related CSSF communication dated 5 June 2020:
Based on recent COVID-19 experiences, the ESRB has identified corporate debt and real estate investment funds as particularly high-priority areas for enhanced scrutiny from a financial stability perspective.
Through the supervisory engagement, the preparedness of these investment fund types to potential future elevated redemption pressures, a deterioration in market liquidity conditions and/or increased valuation uncertainty shall be assessed and potential enhancements shall be evaluated.
On the basis of the data collection questionnaire prepared by ESMA, the CSSF has now launched this exercise by asking a larger sample of UCITS- and alternative investment fund managers to complete, by 31 July 2020, the questionnaire for selected UCITS as well as alternative investment funds. All concerned investment fund managers have been contacted directly by the CSSF in that context.
In order to benefit from a secured exchange platform and ex ante (before submission to the CSSF) data quality checks, the response questionnaire for corporate debt funds will have to be submitted by the investment fund managers through CSSF’s eDesk portal. For that purpose, a dedicated section to complete this questionnaire will be accessible in the eDesk portal on 20 July 2020.
The industry will be duly informed once this section, together with related guidance, will be available for use. Any complementary guidance from ESMA that may become available in that context will also be included in that user guide.