On 30 November 2022, the European Systemic Risk Board (ESRB) announced the adverse scenario for the European Securities and Markets Authority’s (ESMA) money market fund (MMF) stress testing guidelines in 2022.
ESMA, in cooperation with the ESRB are required by legislation to conduct stress tests to assess the resilience of financial institutions or market participants to adverse market developments. As part of this cooperation, the ESRB designs scenarios involving adverse economic and financial market developments.
ESMA has updated guidelines for managers of money market funds who are required to conduct internal stress tests and report the results to the national competent authorities and ESMA. For this purpose, the ESRB, in collaboration with the European Central Bank (ECB) and ESMA has updated the stress parameters for the 2022 ESMA MMF guidelines. The scenario was approved by the ESRB General Board on 26 October and transmitted to ESMA on 4 November 2022.