On 30 January 2020, ESMA announced the launch of a Common Supervisory Action ("CSA") with national competent authorities ("NCAs").

Under the CSA, NCAs are to simultaneously assess in their respective jurisdictions whether UCITS managers comply with liquidity risk management rules in their day-to-day business. It follows ESMA's announcement in November 2019 that it had asked NCAs to step up their scrutiny of UCITS liquidity management.

The CSA will be conducted on the basis of a common methodology developed with ESMA and carried out during 2020 in two stages. The first stage will involve NCAs requesting quantitative data from a large majority of UCITS managers in their respective jurisdictions to get an overview of the supervisory risks faced. In the second stage, NCAs will carry out a more in depth supervisory analyses on a sample of UCITS managers and funds.

The results of the assessment will then be shared through ESMA and used to ensure convergence in the way liquidity risk management is supervised and ultimately enhance financial stability, the protection of investors and the orderly function of financial markets.

The Central Bank of Ireland (the "Central Bank") has listed its work on this CSA amongst its 2020 priorities. Its contribution shall build on the Central Bank's existing focus on this area as outlined in its August 2019 letter to fund management companies wherein it confirmed its increased monitoring of investment fund liquidity and issued a reminder of ongoing obligations regarding liquidity management for both UCITS and AIFs. For further details, please see our previous update.