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IOSCO today published its Final Report on Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes (“CIS”), alongside its Implementation Guidance.
These publications are a culmination of many years’ work undertaken by IOSCO on strengthening effective liquidity risk management and serve to operationalize the Financial Stability Board’s (FSB’s) December 2023 Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds.
The Final Report includes 17 recommendations across six sections: CIS Design Process, Liquidity Management Tools and Measures, Day-to-Day Liquidity Management Practices, Stress Testing, Governance and Disclosures to Investors and Authorities.
The Implementation Guidance should be read alongside the Revised Recommendations as it supplements the Revised Recommendations with more detailed guidance and good practices to support effective implementation.
IOSCO Board Chairman Jean-Paul Servais, who also serves as Chair of the Belgium Financial Services & Markets Authority, said: “These publications are a major milestone on a very important topic in financial markets. Regulators should carefully review the Revised Recommendations alongside the Implementation Guidance, considering appropriate requirements for responsible entities, and how to supervise liquidity management practices on an ongoing basis.”
Christina Choi, Executive Director at the Securities & Futures Commission Hong Kong, who chairs IOSCO’s Committee on Investment Management, said: “Promoting effective liquidity risk management is one of IOSCO’s key objectives. The Revised Recommendations and the Implementation Guidance fulfil our core aims of investor protection and financial stability. Today’s publication represents significant progress in taking forward the work we have carried out alongside the FSB and provides a clear and timely framework for investment managers to enhance liquidity management amidst current macro conditions and challenges.”
