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Sunday, July 09,
2017 1.55PM / IOSCO/MR/18/2017
The International Organization of
Securities Commissions (IOSCO) published today the consultation paper titled Recommendations
of Liquidity Risk Management for Collective Investment Schemes, which seeks
to address structural vulnerabilities arising from asset management activities,
as part of its mission to protect investors and mitigate systemic risk in
global financial markets. IOSCO also published today another consultation paper
that provides practical information, examples and good practices regarding
open-ended fund liquidity risk management, to supplement its
recommendations.
The consultation paper on the
recommendations builds on the guidance set out in IOSCO´s 2013 report
Principles of Liquidity Risk Management for Collective Investment Schemes
(CIS). It also addresses the structural vulnerabilities identified by the
Financial Stability Board (FSB) regarding liquidity risk management in the
asset management industry in its final recommendations published in January
2017.
The FSB asked IOSCO to take forward
the recommendations regarding the mismatch between fund investments and
redemption terms for open-ended funds.
IOSCO´s consultation paper on the
recommendations proposes revisions that supplement the 2013 liquidity report
with additional recommendations and detailed guidance on several issues,
including those highlighted in the FSB report.
Topics covered in the consultation
paper include disclosure to investors, the alignment between asset portfolio
and redemption terms, availability and effectiveness of liquidity risk
management tools and fund level stress testing. In addition, IOSCO includes
additional recommendations on contingency planning and requests specific public
comments on issues affecting exchange traded funds.
The consultation paper on good
practices Open-ended Fund Liquidity and Risk Management – Good Practices and
Issues for Consideration is intended to assist regulators, industry as well as
investors.
For regulators, the paper can act as
a reference guide that illustrates how various jurisdictions regulate liquidity
risk practices within their remit. For the industry, the examples describe
where, when and how certain tools have been used in the past and how they can
be used in the future; additionally, the report describes good practice for
liquidity risk management throughout the entire life cycle of a fund. For
investors, this document outlines scenarios in which the investor could expect
an asset manager to use liquidity management tools to manage liquidity issues
in certain funds.
Comments on these two consultation
reports should be submitted on or before Monday 18 September 2017.
Footnotes & Related Links
· Recommendations of Liquidity Risk Management for Collective Investment Schemes
· IOSCO´s 2013 report Principles of Liquidity Risk Management for Collective Investment Schemes (CIS)
· Open-ended Fund Liquidity and Risk Management – Good Practices and Issues for Consideration
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