Guidelines on stress test scenarios under the MMF Regulation

Following the publication of the final report on 2022 updates to its Guidelines on stress test scenarios under the MMF Regulation (please see Event#18438), the European Securities and Markets Authority, ESMA, has published its final updated guidelines that are applicable with respect to Article 28 of the MMF Regulation. The update follows an assessment of recent market developments and a corresponding calibration of risk parameters compared to the 2021 Guidelines (ESMA34-49-446). The calibrations were jointly developed by ESMA, the European Central Bank (ECB), and the European Systemic Risk Board (ESRB).
The Guidelines include stress test scenarios in relation to hypothetical changes in MMFs’:
(1) liquidity levels;
(2) credit and interest rate risks;
(3) redemption levels;
(4) widening/ narrowing of spreads among indices to which interest rates of portfolio securities are tied; and
(5) macro-economic shocks.