17 December 2020

ESMA: Final report on Guidelines on stress test scenarios under the MMF Regulation

Article 28 of the MMF Regulation provides that ESMA shall develop guidelines with a view to establishing common reference parameters of the stress test scenarios to be included in the stress tests that MMFs or managers of MMFs are required to conduct.

These guidelines are updated at least every year taking into account the latest market developments. ESMA published the translation of the latest update of these guidelines on 3 March 2020 (“the 2019 Guidelines” also referred to as ESMA34-49-1721).

With respect to sections 4.8 (Guidelines on the establishment of common reference stress test scenarios the results of which should be included in the reporting template mentioned in article 37(4) of the MMF Regulation) and 5 (Calibration) of the Guidelines , ESMA indicated in the final report published in 20182 that “[…] section [4.8] will in particular be updated so that managers of MMFs have the information needed to fill in the corresponding fields in the reporting template mentioned in article 37 of the MMF Regulation. This information will include specifications on the type of the stress tests mentioned in this section 4.8 and their calibration in section 5, as well as the way to report their results in the reporting template mentioned in article 37(4) of the MMF Regulation”. Section 4.8 was first updated in 2019.

This 2020 final report includes:
- Unchanged principle-based guidelines on stress testing the MMF or the manager of an MMF shall regularly conduct (sections 4.1 to 4.7 of the Guidelines);
- Unchanged guidelines under section 4.8 of the Guidelines; and
- Updated guidelines on specifications on the type of the stress tests and their calibration, so that managers of MMFs have the information needed to fill in the corresponding fields in the reporting template mentioned in article 37 of the MMF Regulation (section 5 of the Guidelines – updates in red in the Annex).

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