Financial stability and the topics of liquidity risk management and risks related to the use of leverage are high on the agenda of global and regional supervisory bodies, following COVID-19-related market events. AIMA has been engaging globally on this topic, sharing insights and information with the Financial Stability Board (FSB), the International Organization of Securities Commissions (IOSCO), the European Systemic Risk Board and other regional and local supervisory authorities and policy-makers.
FSB updates Financial Stability Surveillance Framework
The Financial Stability Board has updated its financial stability surveillance framework. The purpose of the new framework is to increase the effectiveness of the FSB’s vulnerabilities discussions, and improve the timeliness with which the discussions identify challenges to global financial stability.
IOSCO have issued a joint consultative report on review of margining practices. The report analyses the impact on increase market volatility on margin calls in March and April 2020, and asks for input on margin practice transparency, predictability and volatility across various jurisdictions and markets, as well as market participants' liquidity management preparedness. The report identified six potential areas for further policy work. Comments have been invited through 12 January 2022.
Two further reports are expected to be published by IOSCO in 2021:
- a joint report with the FSB on liquidity risk and its management in open ended funds, and
- a report looking specifically at the corporate bond markets and the impact of the COVID-19-related stresses on liquidity provision,
The use of leverage is being looked at specifically in the EU with a potential update of how leverage should be calculated and reported upon in the AIFMD framework during the upcoming AIFMD review (Q4 2021).
(Last updated: 29 October 2021)