Money Market Funds Regulation ("MMF Regulation") Update

On the 28 September 2018, ESMA published a Consultation Paper setting out draft guidelines on stress test scenarios under the MMF Regulation, which applies to all new and existing money market funds ("MMFs").

In accordance with Article 28 of the MMF Regulation, each MMF is required to establish sound stress testing processes that allow for the identification of possible events or future changes in economic conditions which could negatively impact on a MMF. In order to assess the potential impact that such events or changes could have on a MMF, the manager of a MMF must regularly conduct stress testing based on objective criteria and consider the effects of severe plausible scenarios. Where the stress testing reveals any vulnerability of a MMF, the manager of the MMF is obliged draw up an extensive report with the results of the stress testing and a proposed action plan.