Financial stability
At the international level the FSB, together with IOSCO, are responsible for implementing policies that address structural vulnerabilities arising from asset management activities. Several regulatory actions have been taken to ensure the resilience of the asset management sector since the global financial crisis. The EU’s current risk management regime has recently been put to the test by the Covid-19-led market stress, proving its overall resilience.
Future regulation should be targeted, risk-based and reflect the differing risk profiles of Non-Bank Financial Institutions (NBFI) entities and activities. EFAMA and its members are committed to working closely with international and European regulators on the ongoing improvement of investment funds’ existing risk management framework, and to foster the development of best practices within the investment management industry.
EFAMA Response to IOSCO Consultation report on Leverage
Use of Leverage in Investment Funds in Europe | AMIC-EFAMA Joint Paper
EFAMA reply to FSB consultation on proposed policy recommendations to address structural vulnerabilities from asset management activities
EFAMA firstly wishes to commend the FSB’s change of focus in the course of 2015, from a proposed assessment methodology intended to identify non-bank, non-insurance globally systemically important financial institutions (NBNI G-SIFIs) to a revised and more objective focus on asset management activities. Although we understand the former framework may be revisited by the FSB once its Recommendations are finalised, we appreciate that certain key characteristics of the asset management industry have been recognised and well reflected in the present consultative document.
FSB consultation on NBFI leverage
EFAMA welcomes the FSB recommendation that jurisdictions develop domestic frameworks to monitor and mitigate the build-up of leverage. These analytical frameworks should take a holistic approach and be empirically driven. The main systemic risk stemming from leverage is the imbalance between liquidity demand and supply during periods of stress, not the (collective) default of non-bank financial intermediaries.
Categorising investment funds according to their portfolio liquidity is counterproductive
IOSCO recommendations would unduly hamper investment fund risk management
Since recent market disruptions such as the COVID-19 pandemic, the Financial Stability Board (FSB) and the International Organization of Securities Supervisors (IOSCO) have investigated how to make investment funds more resilient to liquidity shocks. The FSB published their recommendations in December 2023 and IOSCO is now looking into how to adjust their own 2018 recommendations along these lines.
IOSCO consultation on revised liquidity recommendations
In its response to IOSCO’s consultation on the revised recommendations for liquidity risk management for collective investment schemes, EFAMA welcomes the fact that IOSCO recognises aspects essential for proper risk management (e.g., asset managers’ primary responsibility and the absence of one-size-fits-all approaches).
Joint EFAMA & AMIC report on liquidity stress tests in investment funds - January 2019
Solvency II: Data Impacts on Asset Management
The report highlights the need for the asset management industry to proactively work with European insurance companies to respond to the strategic changes caused by the Solvency II Directive.
