Irish Regulatory Update

Author: Clerkin Lynch LLP

Date Published 18/11/2021

Common Supervisory Action on UCITS Liquidity Risk Management

The Central Bank of Ireland commenced its review on UCITS liquidity risk management (LRM) as part of a Common Supervisory Action (CSA) coordinated by the European Securities and Markets Authority (ESMA) in early 2020. The purpose of the CSA was to assess UCITS Fund Management Companies’ compliance with their LRM obligations by simultaneously conducting supervisory activities throughout the EU/EEA.

In light of the seriousness of the findings of the CSA in the context of the importance of effective LRM frameworks, on 18 May 2021, the Central Bank of Ireland published a letter requiring all Irish authorised UCITS Fund Management Companies to conduct a specific review of their practices, documentation, systems and controls.
While this related to UCITS, it illustrates the scrutiny which liquidity management in particular is now subject to. It can be noted that ESMA also produced related guidance, including “Recommendation of the ESRB on liquidity risk in investment firms”.

Action: No Action required.