The ESRB press release and the detailed package of policy actions can be found on the ESRB’s website under the following links:

In this context, the BcL and the CSSF would like to draw particular attention to the following policy actions which are related to and have implications for investment funds and their activities:

a) The ESRB recommends that ESMA coordinates with national competent authorities to undertake a focused piece of supervisory engagement with those investment funds having significant exposures to corporate debt and real estate assets. Through such engagement, the preparedness of these investment funds to potential future elevated redemption pressures, a deterioration in market liquidity conditions and/or increased valuation uncertainty shall be assessed and potential enhancements shall be evaluated.

b) In a public statement, the ESRB emphasizes the importance of the availability and timely use of liquidity management tools by fund managers, especially in times of stressed market conditions. In addition to being a key element of prudent liquidity risk management and protecting investors, the timely use of liquidity management tools (including those that help to ensure the appropriate allocation of redemption costs) also reduces the risk of forced sales of less liquid assets in periods of stress, helping to guard against the adverse system-wide effects of such sales across the financial system.

c) In an issues note on liquidity in the corporate bond and commercial paper markets, the procyclical impact of downgrades and implications for asset managers and insurers, the ESRB examines how large-scale downgrades of corporate bonds can have an impact on the broader financial sector. The objective of the work is to assist policymakers to better evaluate the risks associated with downgrades including the negative impact they could, among other disruptive effects, have, via/through the potential sale of such assets by financial institutions on market liquidity, particularly in the high yield corporate debt segment.

In this context, the European Securities and Markets Authority (ESMA) issued a public statement where it expresses its support to the set of measures, including the Recommendation, published by the ESRB and notes that they complement the ongoing ESMA response to the COVID-19 pandemic.