FSA approves regulation for Investment Funds’ liquidity

The Financial Supervisory Authority approved last month the new regulation on liquidity management for investment funds.

The regulation intends that these funds have sufficient liquid instruments to respond at any time to withdrawals from fund members.

According to the approved regulation, investment funds should maintain at any time high-quality net assets at the value of 10% of total net assets.

High-quality net assets are classified as short-term or short-term bank deposits, government bonds or bonds with a maturity up to one month and reverse repurchase agreements with the Central Bank with a maturity of up to 14 days.

Also, high quality liquid assets will be considered transferable instruments issued or guaranteed by development banks.

As far as securities issued by private financial institutions and corporate bonds are concerned, the FSA regulation provides for a certain level of rating within which instruments can be classified as liquid assets of high quality.

Under the regulation, funds must periodically carry out resistance tests to assess the fund’s ability to respond to a situation of high liquidity needs.

According to the FSA, at the end of last year, net assets of funds amounted to ALL 72 billion.

SCAN

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