• Thursday, November 30, 2023
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Securities regulator moves to address liquidity risk management for CIS


 The International Organisation of Securities Commissions (IOSCO) has renewed its move to address liquidity risk management for Collective Investment Schemes (CIS).

IOSCO this week releases the principle of liquidity risk management for CIS containing a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices concerning liquidity risk management for CIS.

This move is in recognition that good liquidity risk management is a key feature of the correct operations of a CIS. Its fundamental requirement is to ensure that the degree of liquidity that the open-ended CIS manages will allow it, in general, to meet redemption obligations and other liabilities.

The IOSCO board is the governing and standard-setting body of the IOSCO, and is made up of 32 securities regulators. The members of the IOSCO board are the securities regulatory authorities of Argentina, Australia, Belgium, Brazil, Chile, China, France, Germany, Hong Kong, India, Italy, Japan, Korea, Malaysia, Mexico, Morocco, the Netherlands, Nigeria, Ontario, Pakistan, Portugal, Quebec, Romania, Singapore, South Africa, Spain, Switzerland, Trinidad and Tobago, Turkey, United Kingdom, and the United States.

Since the outbreak of the global financial crisis, the issue of liquidity has been a major concern for regulators. However, the discussions on regulatory reform have tended to focus more on the importance of liquidity in the banking sector than in other sectors. These principles have been designed to address the specificities of liquidity risk management in the context of the operations of a CIS.

They are structured according to the time frame of a CIS’s life. They start with principles that should be considered in the design (pre-launch) phase of a CIS. They then outline the principles that should form part of the day-to-day liquidity risk management process.