FSB and IOSCO consult on liquidity risk in open-ended funds

The Financial Stability Board (FSB) and International Organization of Securities Commissions (IOSCO) launched their respective consultations on liquidity risk and its management in open-ended funds (OEFs), which will be published in early July.

The planned FSB consultation report on “Addressing Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds – Revisions to the FSB’s 2017 Policy Recommendations” will set out proposed changes to the FSB’s “Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities” in relation to liquidity mismatch in OEFs.

The proposed changes set out the key objectives of an effective regulatory and supervisory framework to address the vulnerabilities arising from liquidity mismatch in OEFs. The proposals form part of the FSB’s work program on non-bank financial intermediation (NBFI) and should be read in conjunction with the proposed IOSCO guidance on anti-dilution liquidity management tools (LMTs).

The planned IOSCO consultation report is on “Anti-dilution Liquidity Management Tools – Guidance for Effective Implementation of the Recommendations for Liquidity Risk Management for Collective Investment Schemes”. The guidance will be addressed to responsible entities to support greater use of anti-dilution liquidity management tools by OEFs to mitigate investor dilution and potential first-mover advantage arising from structural liquidity mismatch in OEFs.


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