IOSCO finalized a framework to evaluate leverage in investment funds that pose potential risks to financial stability.
The final framework includes a two-step process intended to achieve a "meaningful" and "consistent" analysis of global leverage. In the first step, regulators may use Gross Notional Exposure ("GNE") or adjusted GNE to identify funds likely to pose "stability risks." In the second step, regulators will perform a risk-based analysis of the funds identified in step 1.
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