ESMA updates the parameters and methodology for MMF stress testing

Summary:

The European Securities and Markets Authority (ESMA) has published the Final Report on the Guidelines on stress test scenarios under the Money Market Funds Regulation (MMFR). The updated methodology incorporates parameters reflecting liquidity stress and a new risk factor to simulate the impact of asset sales under stress market conditions. The 2023 parameter update reflects prevailing systemic risk sources, including low growth, inflation, and higher interest rates. The new risk parameters will be used for the first reporting period following the start of the application of the updated Guidelines. The Guidelines will be updated annually considering market developments.