ESMA has published a consultation paper on draft guidelines on stress test scenarios under the Regulation on money market funds (MMF Regulation).

Under Article 28 of the MMF Regulation, each MMF is required to have robust stress testing mechanisms in place which enables identification of possible events or future changes in economic conditions which could adversely affect the fund. The stress tests must be based on objective criteria and consider the effects of severe plausible scenarios.

ESMA is responsible for developing guidelines on the stress test scenarios under the MMF Regulation. Official translations of ESMA’s 2017 guidelines on stress test scenarios for MMFs were published in March 2018, but these guidelines are to be updated once a year to account for the latest market developments. The consultation paper represents the first step in the development of the updated guidelines and sets out proposals on which ESMA is consulting. Stakeholders' views are sought on the methodology, risks factors, data and the calculation of the impact. Comments can be provided up until 1 December 2018. Finalised guidelines are expected in the first quarter of 2019.