Central Bank Highlights Liquidity Management Obligations

Author:Ms Cóilín Keegan
Profession:Maples Group

The Central Bank of Ireland ("CBI") issued a letter to all fund management companies on 7 August 2019 ("Letter") with a timely reminder of their ongoing obligations regarding liquidity management and compliance with legislative and regulatory obligations for UCITS and AIFs. This is in the context of the CBI's continuing engagement with industry on Brexit preparedness, and it stated it will have regard to the Letter as part of its future supervisory engagements.

The CBI reiterated that responsibility for liquidity risk management (including all legislative and regulatory obligations) of each fund under management rests with the board and the relevant designated persons (notwithstanding delegation of functions relating to same), and in particular emphasised:

Liquidity risk management framework: The framework should be appropriately calibrated for each fund to take into account dealing frequency, investment strategy, portfolio composition and investor profile, on an ongoing basis (which may involve daily or intra-day monitoring). Liquidity stress testing: This is a key element of this framework and should take into account that individual asset liquidity and investor demands can change quickly and without notice...

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