On 19 July 2019, ESMA published its final report relating to the 2019 update of the Guidelines on stress tests scenarios ("Stress Tests Guidelines") under the Money Market Fund Regulation ("MMF Regulation"). These Guidelines are in the process of being translated into the official EU languages.

In particular, Section 4.8 of the Stress Tests Guidelines was updated. This section provides the obligation for managers of money market funds ("MMFs") to conduct additional common reference stress test scenarios and to report the results of these tests to their competent authorities.

The additional common reference stress test scenarios that managers of MMFs should conduct relate to the level of changes of liquidity, credit risk, interest rates and exchange rates, level of widening or narrowing spreads among indices to which interest rates of portfolio securities are tied, levels of redemption, and macro-economic shocks affecting the economy as a whole.

The results of these tests must be reported in accordance with Article 37 of the MMF Regulation. In this context, on 19 July 2019, ESMA also published a final report on the Guidelines on the reporting to competent authorities under Article 37 of the MMF Regulation ("Reporting Guidelines").

The amendments introduced by the Stress Tests Guidelines and the new Reporting Guidelines will become applicable two months after the date of publication of these Guidelines on ESMA's websites in all EU official languages, which may take some time. However, ESMA also confirms that MMFs and managers of MMFs are expected to send their reports on the common reference stress test scenarios to their national competent authorities ("NCAs") in Q1 2020.

ESMA recommends MMFs and managers of MMFs to start measuring the impact of the common reference stress test scenarios specified in the Stress Tests Guidelines.

On the basis of these measurements, they will have to fill in the reporting template referred to in Article 37 of the MMF Regulation and in the Commission Implementing Regulation (EU) 2018/7082 and send the results to their NCAs with their first quarterly reports required by Article 37, scheduled in Q1 2020.

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