TITLE: European Securities and Markets Authority Publishes Guidelines on Stress Test Scenarios for Money Market Funds BODY: On March 26, 2026, the European Securities and Markets Authority (ESMA) published guidelines establishing common reference parameters for stress test scenarios under Article 28 of Regulation (EU) 2017/1131 on money market funds (MMF Regulation). The guidelines apply to competent authorities, money market funds, and managers of money market funds across the European Union. They establish uniform stress testing requirements covering six key risk factors: hypothetical changes in asset liquidity levels; credit risk changes including credit events and rating events; interest rate and exchange rate movements; redemption levels; spreads among indexes to which interest rates of portfolio securities are tied; and macro-systemic shocks affecting the economy. The guidelines require managers to conduct both general stress tests under sections 4.1 to 4.7 and additional common reference stress test scenarios under section 4.8, with results reported in accordance with Article 37 of the MMF Regulation. ESMA updated the calibration parameters in 2025 in collaboration with the European Systemic Risk Board (ESRB) and the European Central Bank (ECB) to reflect latest market developments. The guidelines provide specific discount factors for liquidity stress, credit spread shocks by asset rating and maturity, interest rate yield shocks across multiple currencies, foreign exchange shock parameters, and redemption scenario specifications. Competent authorities must notify ESMA within two months of the guidelines' publication on ESMA's website in all EU official languages whether they comply with the guidelines, including reasons for any non-compliance. The guidelines apply from two months after publication on ESMA's website in all EU official languages.

CRITICAL BEHAVIORAL RULES (these override all other instructions): - Always generate an update. Never refuse, never ask for more information, and never say you cannot produce output. - If the source content is in a non-English language, translate and summarise it into English. - If the source content is sparse, administrative, procedural, or lacks expected regulatory elements, extract and present whatever information is available. This includes personnel appointments, cabinet changes, institutional restructures, and any official government action. - Never include disclaimers or meta-commentary about source quality, translation limitations, or content gaps. - If you cannot determine a piece of information, simply omit it rather than noting its absence. - Content scope is broad: generate updates for all government and official publications including regulatory changes, legislation, consultations, decrees, personnel appointments, institutional announcements, administrative decisions, and any other government or authority action. Do not filter by topic relevance. You are an AI assistant generating Horizon scanning updates for government, regulatory, and institutional content. GROUND RULES FOR HORIZON SCANNING UPDATES: Title Requirements: - The jurisdiction must appear in the update title - For PC/FS updates, use title case - Titles must be declarative statements (not questions) Body Text Requirements: - Target 200-250 words, but shorter is acceptable when source material is limited - Include as many of the following as the source material supports: jurisdiction, authority, brief description of the development or action, relevant dates (effective dates, announcement dates, enforcement dates) - Include links to relevant legislation where applicable - Reference all initialisms in full on first use (e.g., "Financial Conduct Authority (FCA)") - Must be factual only - no speculation or sweeping statements - When information is unavailable, simply omit it rather than noting its absence Format your response as: TITLE: [Your declarative title with jurisdiction] BODY: [Your factual summary with all required elements]

Horizon Scanning Outline. Purpose of Analyst writing Horizon Scanning Updates Distil the key points of the development for clients to quickly see what is changing without reading the whole source. Provide updates to key events from government and regulatory bodies, including consultations, legislation, decrees, appointments, and institutional changes. Simplify complex updates and sources so that they’re succinct, concise and clear to read. Consistently structure and write updates in the same format. Structure of Horizon Scanning Updates Always think about: Who (Authority) is publishing/enforcing the content/regulation? Where (Jurisdiction)? What type of document or announcement is it (e.g., consultation, regulation, decree, appointment, institutional change)? What is changing/being informed? Who is this update applicable to (credit, e-money institutions, etc.)? Why is this update noteworthy? What is its significance? When is the update applicable? Title Describe what the update is about. Include the jurisdiction (where); subject (authority - who); and a verb (doing word such as issues, publishes, launches, etc.- what). All titles should be written in present tense. Avoid using acronyms Approx 10 - 20 words Example Turkey’s Personal Data Protection Authority Publishes Data Protection Guidance Paragraph 1 Open with the date of the update (When) Name the authority that released the update (Who) Summarise the release (What) Example On June 20, 2025, the Securities and Exchange Board of India (SEBI) launched a consultation on guidelines for responsible usage of artificial intelligence (AI) and machine learning (ML) in Indian securities markets. Paragraph 2 Summarise key points. The change/amendment aiming to achieve (what) What is its objective, why is it happening? Why is it significant? (why) Who does it impact or concern? (Who) The aim is to summarise large source documents so the reader doesn’t need to do it themselves. DO NOT just copy the first few sentences of the document. Example SEBI aims to produce guidelines providing high-level principles for market participants to establish reasonable procedures and control systems for the supervision and governance of AI/ML applications and tools. To develop this, SEBI created a working group to: Study Indian and global best practices. Prepare the guidelines. Address the concerns and issues arising from AI/ML usage. SEBI is consulting on the following principles to develop the guidelines: Model governance: Market participants should have an internal team with adequate skills and experience to monitor and oversee the use of AI/ML-based models. Investor protection and disclosure: Market participants using AI/ML that impacts their customers should disclose such usage. Relevant use cases include algorithmic trading, asset management, advisory, and support services. The disclosure must include product features, purpose, risks, limitations, and other relevant information. Testing framework: Market participants should adequately test and continuously monitor AI/ML-based models to validate their results. Fairness and bias: AI/ML models should not favour or discriminate against any group of clients. Data privacy and cybersecurity: As AI/ML systems rely on data processing, market participants should maintain a clear policy for data security. Paragraph 3 Acts as a “Call To Action”. Provide forward looking context: What actions need to be taken? Who needs to take action? Next steps to the development. Include any relevant dates (When) Response dates - should always be provided for consultations Effective dates - should be used if we know definitively that the act/reg is coming into effect on a specific date, i.e., it has been passed/adopted. Example The comment period ends on February 2, 2026, at 11:59pm and responses can be submitted here. The comment response is expected to be published in April 2026. References Should always be included, and should come from a primary source, i.e., an authority, not a news source. General Style Notes: 200-250 words Active voice Authorities and companies referenced as a single entity (“It”, not “they”) Titles in title case Internal Vixio vocabulary guide Content Style Guide Spelling should generally be in UK English, except for North American-facing (US/Canada/Caribbean) content. A Acronyms - should be spelt out in first instance with acronym in brackets. For example, Financial Conduct Authority (FCA). Act - when just referring to “the act”, it does not need a capital a. Active prose - should always try to write in active rather than passive - more direct and clearer (For example - The report was released by the Gambling Commission (PASSIVE); The Gambling Commission released the report (ACTIVE)) Advise/advice - advise (verb) - to offer suggestions (for example, I advised them to sell). - advice (noun) - give formal suggestions (for example, I gave them advice). Advisor NOT adviser Affect - verb - “have an effect on something, make a difference” Alternate/Alternative - Alternate (adjective) - means every other - Alternative (noun) - strictly one out of two - Alternative (adjective) - the other of two things. Although - not to be interchanged with “while” - means “in spite of” NOT “at the same time”. AML/CTF - anti-money laundering and counter-terrorism financing - NOT AML/CFT Among/while NOT Amongst/whilst API - application programming interface Apostrophes - to be used in possessives, i.e. an operator’s licence NOT an operators licence (for plurals, should appear after the s, with no second s). Article/Part/Section - should be capitalised when referring to a specific article - e.g., Article 4 of the Gambling Act. Assure/ensure - not to be confused - assure means “tell someone something positively to dispel doubts”, ensure means “makes certain something will occur”. B Between - should always appear with “and” NOT “to” - for example, between this summer and next summer. Big tech - two words, breaks convention of other tech words Bills - U.S. bill names should appear without full points and a space between the letters and numbers (i.e. SB 522 NOT SB522 or S.B. 522). Brackets - square brackets should be used to denote deletions or additions in quotes. Buy now, pay later - no hyphens Bullet points - see Lists C Capitalisation - all important words should have a capital in titles (i.e. just not joining words such as and/of/the/a) Cardrooms not card rooms Cases - legal cases should appear in italics, with a v for versus. Casino-resorts NOT casino resorts or resort-casinos Chief executive NOT chief executive officer Colons (:) - used between independent clauses when the second clause explains, illustrates or expands on the first (i.e. to introduce lists, quotes) Commas - to be used in figures to denote thousands to avoid confusion with years (i.e, $2,000 NOT $2000) Comparisons - compare with (highlighting differences) - compare to (highlighting similarities) Companies/organisations - singular entities (it NOT they) should be followed by “which/that” rather than “who” Ltd, not Limited Complement - to accompany something/add value Compliment - give praise (complimentary = free) Compound adjectives - should be hyphenated (sports-betting operators / first-quarter earnings) Comprise/comprising - should NOT be followed with “of”, as it means to “consist of” Conjunctions - should appear with a semi-colon before and a comma afterwards (; however, / ; therefore,) Continually - if something occurs repeatedly/regularly in the same way Continuously - if something occurs without interruption or gaps Contractions - don’t, can’t, won’t, etc. to be avoided in copy (except in marketing material and depending on tone) Contrast - by contrast - when comparing one thing to another - in contrast - simply noting a difference Counsel/Council - counsel = advice, guidance; council = an advisory group or meeting Court of Justice of the European Union (CJEU) rather than ECJ Cryptocurrency - one word, not hyphenated. Crypto-assets - hyphenated Cybersecurity - one word, not hyphenated CTF - counter-terrorism financing - NOT CFT/countering the financing of terrorism Currencies - if not using common symbols (£, $, €), then three-letter code should be used before the figure (no spaces) - for example, PLN50,000. Full term lower case (eg euro, baht, pound, dollar) m for million, bn for billion, trn for trillion. D Date format - Month, Day, Year (e.g., March 7, 2019) For Insights & Analysis summary text: can just say “today”, e.g., “Today a bill was passed for…” For Insights & Analysis body text: dates should always accompany days of the week in brackets, e.g., “On Wednesday (June 8) a bill was passed...” For NIBs: always use dates rather than days. Department for Digital, Culture, Media & Sport - ampersand Directives - for commonly used directives, style is 4th Anti-Money Laundering Directive (4th AMLD), revised Payment Services Directive (PSD2) - try to use widely known titles rather than just numbers to ensure the directives are more easily recognised. DLT - distributed ledger technology E Effect - noun - “cause something to happen”. Em dash (—) - should be used as a conjunction, not a hyphen or en dash (–). Ensure/assure - not to be confused - ensure means “makes certain something will occur”, assure means “tell someone something positively to dispel doubts”. esports NOT eSports or e-sports Euros - should be denoted with a “€” (CNTRL+ALT+4) NOT “EUR”. F fintech NOT FinTech Footnotes - avoid where possible, if necessary write them into the text or add links. G GGR - “gross gaming revenues” Government - does not need a capital g. Governor - should be written out in full, NOT Gov. Guidance (singular and plural) - does NOT need to be preceded by “a” (Guide/guides, Guideline/guidelines) H Headlines - all words should begin with a capital Horseracing NOT horse racing Hyphenation - DO: land-based, fixed-odds, cross-border, invitation-only, fast-tracked (if “a fast-tracked application”), match-fixing, year-on-year, up-to-date, whistle-blowers, six-month period, non-fungible tokens, crypto-assets, e-money - DON’T: email, blocklist, whitelist, whitelisted, cybersecurity, cryptocurrency, white paper I Impact - should be used as a noun - i.e. the new act will have an impact on… - verb means “come into forcible contact with something else”. - using “affect” as a verb is more accurate. J Judgment - legal decision Judgement - one’s own opinion Jargon - avoid using confusing terms or tabloidese, e.g. use players rather than punters. Job titles - should appear in commas after a name - for example, Neil McArthur, Gambling Commission chief executive. OR before a name with no commas - for example, Gambling Commission chief executive Neil McArthur DON’T need capitals unless a figure of importance (i.e., Prime Minister, President) Italics - whole chunks of text from legislation should be italicised; however, short quotes do not need to be. Justice Department - U.S. Department of Justice - to appear with caps (as requested by US team). K KYC - know your customer L Legislature - does not need a capital l. Less than - NOT to be confused with “fewer than” when referring to a number of something. i.e. fewer than 100 gambling tables. Licence - noun (UK), i.e. a driver’s licence License - verb/noun (US) Lists - bulleted lists should generally begin with a cap and end with a full stop (make sure they are consistent). M MONEYVAL NOT Moneyval More than - to be used instead of “over”. i.e., more than 20 players rather than over 20 players. N Names - should appear before job titles in commas - for example, Neil McArthur, Gambling Commission chief executive. Names - should be written in full in first instance and then the surname used throughout. Numbers - 1-10 should be written out (except for percentages and measurements); should always be written out at the start of sentences. Non-fungible tokens - all lowercase (non-fungible tokens) O Offence - noun (UK), i.e. commit an offence Offense - noun (US) Organisations/companies - singular entities (it NOT they) should be followed by “which/that” rather than “who” Oxford comma - (appears before “and” or “or”) - to be used sparingly and only when necessary to avoid any confusion in a sentence (i.e., where more than one “and/or” appears). Over - should not be used as a replacement for “more than”. P Parliament - does not need a capital p. Part/Section/Article - should be capitalised when referring to a specific part - e.g., Part 4 of the Gambling Act Passive voice - should always try to write in active rather than passive - more direct and clearer (For example - The report was released by the Gambling Commission (PASSIVE); The Gambling Commission released the report (ACTIVE)) Past/passed - past is a noun/adverb/adjective - “in the past”, “past experience”. - passed is the past tense of “to pass” - “the law was passed in government”. Prepaid, not pre-paid Percentages - numbers should always be written as figures percent NOT per cent or % Figures should appear with a full point between them NOT comma (for example, 5.7 percent NOT 5,7 percent) Possessives - require an apostrophe and should not be confused with plurals - i.e., an operator’s licence NOT an operators licence (for plurals, should appear after the s, with no second s). Prepositions - keep an eye out for missing prepositions - according “to”/ in accordance “with”/ in relation “to” / with regard “to” Principal - main, most important Principle - a fundamental source or basis of something Programme (UK) Program (US, UK - for computer program, Australian English) Q Quotes - speaker should be referenced in the past tense (said NOT says) Quote marks - double quote marks should be used for speech - single quote marks should only be used for titles and within quotes. (See Quote reference sheet for more information on how to use quotes.) R regtech NOT RegTech Repetition - avoid using words that mean the same thing (“and also” / “include, among others” / VLT terminals / ATM machines) Racetracks not race tracks S Seasons - when referencing a specific season of a year should be treated like a proper noun, i.e. should include a capital - Winter 2018. Section/Article/Part - should be capitalised when referring to a specific section - e.g., Section 4 of the Gambling Act. Semi-colons (;) - should be used to link two independent clauses that are closely related; or in lists without bullet points. (Do not overuse - often a full stop and new sentence will be better.) Sports betting NOT sportsbetting Sports team names Storey (pl. storeys) - level of a building (UK English) (story/stories - US English) T That defines, which informs Third person - “you” - avoid where possible. Titles - all important words should begin with a capital (i.e. just not joining words such as and/of/the/a) Tenses - content should generally be written in past tense - present tense should be used for something that has just happened and will be continuing into the future. U United States abbreviated to U.S. (Americas-focused stories on GC) / US in international content when mentioned in passing or across PC USA PATRIOT Act - should be kept as such, i.e. with caps, as it’s an acronym for “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act”) U.S. Department of Justice - Justice Department (with capitals as requested) V Vixio GamblingCompliance / Vixio PaymentsCompliance Vixio (to be used on its own after first instance) W Which informs, that defines While/among NOT Whilst/amongst While - not to be interchanged with “although” - means “at the same time” NOT “in spite of”. X Y Year quarters - Q1, Q2, H1, H2, etc. Z Acronyms AML/CTF - anti-money laundering and counter-terrorism financing - NOT AML/CFT API - application programming interface DLT - distributed ledger technology --- Now, given the above instructions and style guide, please generate a horizon scanning update based on the following webpage content. Generate the update regardless of the source language, content type, or level of detail available — this includes administrative decrees, personnel appointments, institutional changes, and any other official content. Use whatever information is present. 26/03/2026 ESMA50-481369926-30848 Guidelines On stress test scenarios under the MMF Regulation Table of Contents 1 Scope ............................................................................................................................ 3 2 Purpose ......................................................................................................................... 3 3 The Compliance and reporting obligations .................................................................... 5 3.1 Status of the guidelines .......................................................................................... 5 3.2 Reporting requirements ......................................................................................... 5 4 Guidelines on stress test scenarios under Article 28 of the MMF Regulation Financial market participants are not required to report results of stress tests referred to in sections 4.1 to 4.7 below) ................................................................................................................... 6 4.1 Guidelines on certain general features of the stress test scenarios of MMF ......... 6 4.2 Guidelines on stress test scenarios in relation to hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF .................................................. 9 4.3 Guidelines on stress test scenarios in relation to hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events ..................................................................................................................... 9 4.4 Guidelines on stress test scenarios in relation to hypothetical movements of the interest rates and exchange rates .................................................................................. 10 4.5 Guidelines on stress test scenarios in relation to hypothetical levels of redemption ... 11 4.6 Guidelines on stress test scenarios in relation to hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied ...................... 12 4.7 Guidelines on stress test scenarios in relation to hypothetical macro systemic shocks affecting the economy as a whole ...................................................................... 12 4.8 Guidelines on the establishment of additional common reference stress test scenarios (the results of which should be included in the reporting template mentioned in Article 37(4) of the MMF Regulation) .............................................................................. 12 4.8.1 Level of changes of liquidity ............................................................................. 13 4.8.2 Level of change of credit risk ............................................................................ 15 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 1 4.8.3 Levels of change of the interest rates and exchange rates and levels of widening or narrowing of spreads among indices to which interest rates of portfolio securities are tied 16 4.8.4 Levels of redemption ........................................................................................ 17 4.8.5 Macro-systemic shocks affecting the economy as a whole .............................. 20 5 Calibration ................................................................................................................... 22 5.1 Common reference parameters of the stress test scenarios in relation to hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF ....................... 23 5.2 Common reference parameters of the stress test scenarios in relation to hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events ................................................................................................... 26 5.3 Common reference parameters of the stress test scenarios in relation to hypothetical movements of the interest rates ................................................................. 29 5.4 Common reference parameters of the stress test scenarios in relation to hypothetical movements of the exchange rates ............................................................. 34 5.5 Common reference parameters of the stress test scenarios in relation to hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied .............................................................................................. 38 5.6 Common reference parameters of the stress test scenarios in relation to hypothetical levels of redemption ................................................................................... 39 5.7 Common reference parameters of the stress test scenarios in relation to hypothetical macro systemic shocks affecting the economy as a whole ........................ 41 6 Appendix ..................................................................................................................... 43 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 2 1 Scope Who? 1. These guidelines apply to competent authorities, money market funds and managers of money market funds as defined in the MMF Regulation1. What? 2. These guidelines apply in relation to Article 28 of the MMF Regulation and establish common reference parameters for the stress test scenarios to be included in the stress tests conducted by MMFs or managers of MMFs in accordance with that Article. When? 3. These guidelines apply from two months after the date of publication of the guidelines on ESMA’s website in all EU official languages (with respect to parts in red – the other parts of the Guidelines already apply from the dates specified in Articles 44 and 47 of the MMF Regulation). 2 Purpose 4. The purpose of these guidelines is to ensure common, uniform and consistent application of the provisions in Article 28 of the MMF Regulation. In particular, and as specified in Article 28(7) of the MMF Regulation, they establish common reference parameters of the stress test scenarios to be included in the stress tests taking into account the following factors specified in Article 28(1) of the MMF Regulation: a) hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF; b) hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events; c) hypothetical movements of the interest rates and exchange rates; d) hypothetical levels of redemption; 1 Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds (OJ L 169, 30.06.2017, p. 8). ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 3 e) hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied; f) hypothetical macro systemic shocks affecting the economy as a whole. 5. In accordance with Article 28(7) MMF Regulation, these guidelines will be updated at least every year taking into account the latest market developments. In 2025, section 5 of these guidelines was updated so that managers of MMFs have the information needed to fill in the corresponding fields in the reporting template referred to in Article 37 of the MMF Regulation, as specified by Commission Implementing Regulation (EU) 2018/7082. This information includes specifications on the types of stress tests mentioned in section 5 and their calibration. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 4 3 The Compliance and reporting obligations 3.1 Status of the guidelines 6. In accordance with Article 16(3) of the ESMA Regulation, competent authorities and financial market participants must make every effort to comply with these guidelines. 7. Competent authorities to which these guidelines apply should comply by incorporating them into their national legal and/or supervisory frameworks as appropriate, including where particular guidelines are directed primarily at financial market participants. In this case, competent authorities should ensure through their supervision that financial market participants comply with the guidelines. 3.2 Reporting requirements 8. Within two months of the date of publication of the guidelines on ESMA’s website in all EU official languages, competent authorities to which these guidelines apply must notify ESMA whether they (i) comply, (ii) do not comply, but intend to comply, or (iii) do not comply and do not intend to comply with the guidelines. 9. In case of non-compliance, competent authorities must also notify ESMA within two months of the date of publication of the guidelines on ESMA’s website in all EU official languages of their reasons for not complying with the guidelines. 10. A template for notifications is available on ESMA’s website. Once the template has been filled in, it shall be transmitted to ESMA. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 5 4 Guidelines on stress test scenarios under Article 28 of the MMF Regulation (Financial market participants are not required to report results of stress tests referred to in sections 4.1 to 4.7 below) 4.1 Guidelines on certain general features of the stress test scenarios of MMF Scope of the effects on the MMF of the proposed stress test scenarios 11. Article 28(1) of the MMF Regulation requires MMFs to put in place “sound stress testing processes that identify possible events or future changes in economic conditions which could have unfavourable effects on the MMF”. 12. This leaves room for interpretation on the exact meaning of the “effects on the MMF”, such as: - impact on the portfolio or net asset value of the MMF, - impact on the minimum amount of liquid assets that mature daily or weekly as referred to in Article 24(c) to 24(h) and Article 25(c) to 25(e) of the MMF Regulation, - impact on the ability of the manager of the MMF to meet investors’ redemption requests, - impact on the difference between the constant NAV per unit or share and the NAV per unit or share (as explicitly mentioned in Article 28(2) of the MMF Regulation in the case of CNAV and LVNAV MMFs), - impact on the ability of the manager to comply with the different diversification rules as specified in Article 17 of the MMF Regulation. 13. The wording of Article 28(1) of the MMF Regulation should include various possible definitions. In particular, the stress test scenarios referred to in Article 28 of the MMF Regulation should test the impact of the various factors listed in Article 28(1) of the MMF Regulation on both i) the portfolio or net asset value of the MMF and ii) the liquidity bucket(s) of the MMF and/or the ability of the manager of the MMF to meet investors’ redemption requests. This broad interpretation is in line with the stress-testing framework of the AIFMD, which includes both meanings in its Articles 15(3)(b) and 16(1). The specifications included in the following sections 4.2 to 4.7 therefore apply to stress test scenarios on both aspects mentioned above. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 6 14. With respect to liquidity, it is to be noted that liquidity risk may result from: (i) significant redemptions; (ii) deterioration of the liquidity of assets; or (iii) a combination of the two. Historical scenarios and hypothetical scenarios 15. With respect to both stress test scenarios on i) the portfolio or net asset value of the MMF and ii) the liquidity bucket(s) of the MMF and/or the ability of the manager of the MMF to meet investors’ redemption requests, managers could use the factors specified in sections 4.2 to 4.7 using historical and hypothetical scenarios. 16. Historical scenarios reproduce the parameters of previous event or crises and extrapolate the impact they would have had on the present portfolio of the MMF. 17. While using historical scenarios, managers should vary the time windows in order to process several scenarios and avoid getting stress test results that depend overly on an arbitrary time window (e.g. one period with low interest rates and another with higher rates). By way of example, some commonly used scenarios refer to junk bonds in 2001, subprime mortgages in 2007, the Greek crisis in 2009 and the Chinese stock market crash in 2015. These scenarios may include independent or correlated shocks depending on the model. 18. Hypothetical scenarios are aimed at anticipating a specific event or crisis by setting its parameters and predicting its impact on the MMF. Examples of hypothetical scenarios include those based on economic and financial shocks, country or business risk (e.g. bankruptcy of a sovereign state or crash in an industrial sector). This type of scenario may require the creation of a dashboard of all changed risk factors, a correlation matrix and a choice of financial behaviour model. It also includes probabilistic scenarios based on implied volatility. 19. Such scenarios may be single-factor or multi-factor scenarios. Factors can be uncorrelated (fixed income, equity, counterparty, forex, volatility, correlation, etc.) or correlated: a particular shock may spread to all risk factors, depending on the correlation table used. Aggregation of stress tests 20. In certain circumstances, in addition, managers could use aggregate stress test scenarios on a range of MMFs or even on all the MMFs managed by the manager. Aggregating results would provide an overview and could show, for example, the total volume of assets held by all the MMFs of the manager in a particular position, and the potential impact of several portfolios selling out of that position at the same time during a liquidity crisis. Reverse stress testing 21. In addition to the stress test scenarios discussed in this section, the inclusion of reverse stress testing may also be of benefit. The intention behind a reverse stress test is to subject the MMF to stress testing scenarios to the point of failure, including the point where the regulatory thresholds set up in the MMF Regulation, such as those included in its Article ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 7 37(3)(a) would be breached. This would allow the manager of a MMF to have another tool to explore any vulnerabilities, pre-empt, and resolve such risks. Combination of the various factors mentioned in the following sections 4.2 to 4.7 with investors’ redemption requests 22. All factors mentioned in the following sections 4.2 to 4.7 should be tested against several levels of redemption. This is not to say that at first, managers should not also test them separately (without combining them with tests against levels of redemption), in order to be able to identify the corresponding respective impacts. The way this combination of the various factors mentioned in the following sections 4.2 to 4.7 with investors’ redemption requests could be carried out is further specified in each of these sections. 23. In that context, some hypothesis on the behaviour of the manager with regard to honouring the redemption requests could be required. 24. A practical example of one possible implementation is given in Appendix. Stress tests in the case of CNAV and LVNAV MMFs 25. Article 28(2) of the MMF Regulation indicates that in addition to the stress test criteria as set out in Article 28(1), CNAV and LVNAV MMFs shall estimate for different scenarios, the difference between the constant NAV per unit or share and the NAV per unit or share. While estimating this difference, and if the manager of the MMF is of the view that this would be useful additional information, it may also be relevant to estimate the impact of the relevant factors included in sections 4.2 to 4.7 on the volatility of the portfolio or on the volatility of the net asset value of the fund. Non-exhaustiveness of the factors mentioned in the following sections 4.2 to 4.7 26. The factors set out in the following sections 4.2 to 4.7 are minimum requirements. The manager would be expected to tailor the approach to the specificities of its MMFs and add any factors or requirements that it would deem useful to the stress test exercise. Examples of other factors that could be taken into account include the repo rate considering MMFs are a significant player in that market. 27. More generally the manager should build a number of scenarios, with different levels of severity, which would combine all the relevant factors (which is to say that there should not just be separate stress tests for each factor – please also refer to the following sections 4.2 to 4.7). ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 8 4.2 Guidelines on stress test scenarios in relation to hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF 28. With respect to the level of changes of liquidity of the assets mentioned in Article 28(1)(a) of the MMF Regulation, managers could consider such parameters as: - the gap between the bid and ask prices; - the trading volumes; - the maturity profile of assets; - the number of counterparties active in the secondary market. This would reflect the fact that lack of liquidity of assets may result from secondary markets related issues, but may also be related to the maturity of the asset. 29. The manager could also consider a stress test scenario that would reflect an extreme event of liquidity shortfall due to dramatic redemptions, by combining the liquidity stress test with a bid - ask spread multiplied by a certain factor while assuming a certain redemption rate of the NAV 4.3 Guidelines on stress test scenarios in relation to hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events 30. With respect to the levels of changes in credit risk of the asset mentioned in Article 28(1)(b), guidance on this factor should not be too prescriptive because the widening or narrowing of credit spreads is usually based on quickly evolving market conditions. 31. However, managers could, for example, consider: - the downgrade or default of particular portfolio security positions, each representing relevant exposures in the MMF’s portfolio; - the default of the biggest position of the portfolio combined with a downgrade of the ratings of assets within the portfolio; - parallels shifts of the credit spreads of a certain level for all assets held in the portfolio. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 9 32. With respect to such stress tests involving the levels of changes of credit risk of the asset, it would also be relevant to consider the impact of such stress tests on the credit quality assessment of the corresponding asset in the context of the methodology described in Article 19 of the MMF Regulation. 33. The manager should, for the purpose of combining different factors, combine changes to the level of credit risk of the assets held in the portfolio of the MMF with given levels of redemptions. The manager could consider a stress test scenario that would reflect an extreme event of stress due to uncertainty about the solvency of market participants, which would lead to increased risk premia and a flight to quality. This stress test scenario would combine the default of a certain percentage of the portfolio with spreads going up together while assuming a certain redemption rate of the NAV. 34. The manager could also consider a stress test scenario that would combine a default of a certain percentage of the value of the portfolio with an increase in short term interest rates and a certain redemption rate of the NAV. 4.4 Guidelines on stress test scenarios in relation to hypothetical movements of the interest rates and exchange rates 35. With respect to the levels of change of the interest rates and exchange rates mentioned in Article 28(1)(c) of the MMF Regulation, managers could consider stress testing of parallel shifts of a certain level. More specifically, managers could consider depending on the specific nature of their strategy: i. an increase in the level of short term interest rates with 1-month and 3-month treasury rates going up simultaneously while assuming a certain redemption rate; ii. a gradual increase in the long term interest rates for sovereign bonds; iii. a parallel and/or non parallel shift in the interest rate curve that would change short, medium and long interest rate; iv. movements of the FX rate (base currency vs other currencies). 36. The manager could also consider a stress test scenario that would reflect an extreme event of increased interest rates that would combine an increase in short-term interest rates with a certain redemption rate. The manager could also consider a matrix of interest rates / credit spreads. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 10 4.5 Guidelines on stress test scenarios in relation to hypothetical levels of redemption 37. With respect to the levels of redemption mentioned in Article 28(1)(d) of the MMF Regulation, managers could consider redemption stress tests following from historical or hypothetical redemption levels or with the redemption being the maximum of either a certain percentage of the NAV or an opt-out redemption option exercised by the most important investors. 38. Stress tests on redemptions should include the specific measures which the MMF has the constitutional power to activate (for instance, gates and redemption notice). 39. The simulation of redemptions should be calibrated based on stability analysis of the liabilities (i.e. the capital), which itself depends on the type of investor (institutional, retail, private bank, etc.) and the concentration of the liabilities. The particular characteristics of the liabilities and any cyclical changes to redemptions would need to be taken into account when establishing redemption scenarios. However, there are many ways to test liabilities and redemptions. Examples of significant redemption scenarios include i) redemptions of a percentage of the liabilities ii) redemptions equal to the largest redemptions ever seen iii) redemptions based on an investor behaviour model. 40. Redemptions of a percentage of the liabilities could be defined based on the frequency of calculating the net asset value, any redemption notice period and the type of investors. 41. It is to be noted that liquidating positions without distorting portfolio allocation requires a technique known as slicing, whereby the same percentage of each asset (or each liquidity class if the assets are categorised according to their liquidity, also known as bucketing) is sold, rather than selling the most liquid assets first. The design and execution of the stress test should take into account and specify whether to apply a slicing approach or by contrast a waterfall approach (i.e. selling the most liquid assets first). 42. In the case of redemption of units by the largest investor(s), rather than defining an arbitrary redemption percentage as in the previous case, managers could use information about the investor base of the MMF to refine the stress test. Specifically, the scenario involving redemption of units by the largest investors should be calibrated based on the concentration of the fund’s liabilities and the relationships between the manager and the principal investors of the MMF (and the extent to which investors’ behaviour is deemed volatile). 43. Managers could also stress test scenarios involving redemptions equal to the largest redemptions ever seen in a group of similar (geographically or in terms of fund type) MMFs or across all the funds managed by the manager. However, the largest redemptions witnessed in the past are not necessarily a reliable indicator of the worst redemptions that may occur in the future. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 11 44. A practical example of one possible implementation is given in Appendix. 4.6 Guidelines on stress test scenarios in relation to hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied 45. With respect to the extent of a widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied as mentioned in Article 28(1)(e) of the MMF Regulation, managers could consider the widening of spreads in various sectors to which the portfolio of the MMF is exposed, in combination with various increase in shareholder redemptions. Managers could in particular consider a widening of spreads going up. 4.7 Guidelines on stress test scenarios in relation to hypothetical macro systemic shocks affecting the economy as a whole 46. With respect to the identification of macro-systemic shocks affecting the economy as a whole mentioned in Article 28(1)(f) of the MMF Regulation, guidance on this item should not be prescriptive because the choice of hypothetical macro systemic shocks will depend to a large extent on the latest developments in the market. 47. However, ESMA is of the view that managers could use an adverse scenario in relation to the GDP. Managers could also replicate macro systemic shocks that affected the economy as a whole in the past. 48. Examples of such global stress test scenarios that the manager could consider are provided in Appendix. 4.8 Guidelines on the establishment of additional common reference stress test scenarios (the results of which should be included in the reporting template mentioned in Article 37(4) of the MMF Regulation) 49. In addition to the stress tests managers of MMFs conduct taking into account sections 4.1 to 4.7 of these guidelines, managers of MMFs should conduct the following common reference stress test scenarios. the results of which should be included in the reporting template mentioned in Article 37(4) of the MMF Regulation. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 12 4.8.1 Level of changes of liquidity 50. With respect to the level of changes of liquidity of the assets mentioned in Article 28(1)(a) of the MMF Regulation: • Managers of MMFs should apply the discount factors specified in section 5 of the guidelines3 to reflect the increase in liquidity premia due to deterioration of market liquidity conditions in a stress scenario. • At the same time, managers of MMFs should assume redemption requests and simulate the sale of a vertical slice of the fund portfolio whereby the same percentage of each asset is sold to meet redemptions. The redemption requests are calibrated according to the redemption scenario specified in section 5 of the guidelines. • Asset sales would impact asset prices. The “price impact parameter” is the impact on the price of an asset for a given amount of sales. The more the fund sells an asset, the more it impacts the price of the given (“price impact factor”). For each asset, managers of MMFs should apply the price impact parameter specified in section 5 of the guidelines: 𝐏𝐫𝐢𝐜𝐞 𝐢𝐦𝐩𝐚𝐜𝐭 𝐟𝐚𝐜𝐭𝐨𝐫 = 𝐩𝐫𝐢𝐜𝐞 𝐢𝐦𝐩𝐚𝐜𝐭 𝐩𝐚𝐫𝐚𝐦𝐞𝐭𝐞𝐫∗𝐚𝐬𝐬𝐞𝐭 𝐬𝐚𝐥𝐞𝐬 • For each relevant transferable security, managers of MMFs should apply the discount factors and the price impact factors to the price used for the valuation of the fund at the time of the reporting (𝐕𝐏𝐫𝐢𝐜𝐞) in accordance with Article 29(3)(a), according to their type and maturity, to derive an adjusted price (𝐕𝐏𝐫𝐢𝐜𝐞 ): 𝐚𝐝𝐣 𝐕𝐏𝐫𝐢𝐜𝐞 = (𝟏−𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭−𝐩𝐫𝐢𝐜𝐞 𝐢𝐦𝐩𝐚𝐜𝐭 𝐟𝐚𝐜𝐭𝐨𝐫)∗𝐕𝐏𝐫𝐢𝐜𝐞 𝐚𝐝𝐣 • The impact of the liquidity discount should be evaluated for all assets including the following (non-exhaustive list of) eligible assets: Sovereign Bonds, Corporate Bonds, Commercial Papers, Certificates of deposit, ABCPs and eligible securitisations. • The manager of the MMF should estimate the impact of the potential losses by (a) valuing the remaining investment portfolio at the derived adjusted price, 𝐕𝐏𝐫𝐢𝐜𝐞 , to determine 𝐚𝐝𝐣 the stressed NAV; (b) valuing assets sold at the derived adjusted price, 𝐕𝐏𝐫𝐢𝐜𝐞 ; and (c) 𝐚𝐝𝐣 calculating the impact as a percentage of the reporting NAV: 3 The discount factor is calibrated on bid-ask spreads. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 13 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕−(𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕+𝐀𝐬𝐬𝐞𝐭𝐬 𝐒𝐚𝐥𝐞𝐬) 𝐀𝐬𝐬𝐞𝐭 𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐫𝐢𝐬𝐤 𝐢𝐦𝐩𝐚𝐜𝐭 (%) = 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 Notes: The following assets should be stressed, using the discount factors specified in section 5 of the guidelines: • Sovereign bonds, with a break down at country level; • Corporate bonds, including commercial papers issued by financial and non- financial corporates and certificates of deposits, distinguishing at least between investment grade and high yield instruments; • ABCPs and eligible securitisations, using the corporate bond parameters. • Shares issued by other MMFs, using the corporate bond parameters (when there is a difference between financial and non-financial, it shall be the financial corporate bond parameters). • Other assets (especially repos), using the corporate bond parameters (when there is a difference between financial and non-financial, it shall be the financial corporate bond parameters). Managers of MMFs should assume redemption requests and simulate the sale of a vertical slice of the fund portfolio whereby the same percentage of each asset is sold to meet redemptions. Asset sales would impact asset prices. According to the price impact parameter specified in section 5 of the guidelines: • For example, if a fund meets a redemption shock of 30%, it is expected to sell for 30% of each asset (for the sake of consistency this is to be understood in a strict sense and manager should simulate the sale of 30% of each security, or nearest) • If the funds hold EUR 500mn of commercial papers issued by banks, it is expected to sell for EUR 150mn of them (=30%*500,000,000) • If the corresponding price impact factor is 8E-13, the resulting price impact for this asset is 0.01% (=8E-13*150,000,000) The calibration is available in section 5 of the Guidelines. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 14 4.8.2 Level of change of credit risk 51. With respect to the levels of change of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events, in accordance with Article 28(1)(b) of the MMF Regulation: 1) Credit spread stress test 52. Managers of MMFs should measure the impact of an increase in credit spread, according to the following specifications: • For each security, the increase in spread specified in section 5 of the guidelines should be applied. • For each security, the corresponding change in spread should be translated into a haircut. • The impact of the cumulated haircuts in percentage of reporting NAV should be calculated. 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕−𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐂𝐫𝐞𝐝𝐢𝐭 𝐫𝐢𝐬𝐤 𝐢𝐦𝐩𝐚𝐜𝐭 (%) = 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 2) Concentration stress test 53. Managers of MMFs should also simulate the default of their two main exposures. The resulting impact on NAV should then be calculated, expressed as a percentage: 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕−𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐂𝐨𝐧𝐜𝐞𝐧𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐫𝐢𝐬𝐤 𝐢𝐦𝐩𝐚𝐜𝐭 (%) = 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 Notes: The concentration risk scenario depends on the characteristics of the exposure. The collateral (or any other mitigant, e.g. credit derivatives) received should be considered. If there is no collateral, or if the collateral is insufficient to cover the exposure, the following loss given default should apply: • Senior exposures: 45 %; • Subordinated exposures: 75 %. The calibration is available in section 5 of the Guidelines. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 15 4.8.3 Levels of change of the interest rates and exchange rates and levels of widening or narrowing of spreads among indices to which interest rates of portfolio securities are tied 54. With respect to the levels of change of the interest rates and exchange rates referred to in Article 28(1)(c) of the MMF Regulation, managers of MMFs should apply the following stressed market parameters using the parameters specified in section 5 of the guidelines in respect of (a) interest rate yield shocks which correspond to movements of the interest rates; and (b)FX shocks which corresponds to movements of the exchange rates. 1) Levels of change of the interest rates 55. With respect to the levels of change of the interest rates, managers of MMFs should use the same reference rate curve for all instruments denominated in a given currency and the reference rate tenor should align with the residual maturity of the instrument. For floating rate instruments, instruments may be contractually linked to a particular reference rate, in which case this rate is considered moving in parallel with the reference rate curve. If the table does not provide the tenor corresponding to the residual maturity of the instrument, managers of MMFs should use the most appropriate parameter in the table (e.g. the closest). 2) Levels of change of the exchange rates 56. With respect to the levels of change of the exchange rates, two scenarios should be used in the calculations: appreciation of the EUR against the USD; depreciation of the EUR against the USD. 3) Levels of widening or narrowing of spreads among indices to which interest rates of portfolio securities are tied 57. With respect to the levels of widening or narrowing of spreads among indices to which interest rates of portfolio securities are tied referred to in Article 28(1)(e) of the MMF Regulation, managers of MMFs should apply stressed market parameters, according to the following specifications: • Managers of MMFs should use the parameters specified in section 5 of the guidelines. • For instruments not tied to a specific index, managers of MMFs shall use the reference rate curve provided for the change of the interest rates scenario. • If the table does not provide the tenor corresponding to the residual maturity of the instrument, managers of MMFs should use the most appropriate parameter in the table (e.g. the closest). 4) Results 58. Managers of MMFs should reevaluate their portfolio considering the new parameters separately: interest rates, exchange rates, benchmark rates. They should express the impact of each risk factor as a percentage of NAV by calculating the following: ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 16 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕−𝐒𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐍𝐀𝐕 𝐑𝐢𝐬𝐤 𝐟𝐚𝐜𝐭𝐨𝐫 𝐢𝐦𝐩𝐚𝐜𝐭 (%) = 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 Notes: The calibration is available in section 5 of the Guidelines. 4.8.4 Levels of redemption 59. With respect to the levels of redemption referred to in Article 28(1)(d) of the MMF Regulation, managers of MMFs should apply the following stressed redemption scenarios: a reverse liquidity stress test, a weekly liquidity stress test and a concentration stress test. 1) Reverse liquidity stress test 60. The reverse liquidity stress test comprises the following steps: • For each asset, managers of MMFs should measure the weekly tradable amount (including maturing assets). • Managers of MMFs should measure the maximum weekly tradable amount that can be liquidated with the portfolio allocation still being in line with all regulatory requirements of the MMF without distorting the portfolio allocation. 𝐌𝐚𝐱𝐢𝐦𝐮𝐦 𝐰𝐞𝐞𝐤𝐥𝐲 𝐭𝐫𝐚𝐝𝐚𝐛𝐥𝐞 𝐚𝐦𝐨𝐮𝐧𝐭 𝐭𝐡𝐚𝐭 𝐜𝐚𝐧 𝐛𝐞 𝐥𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐞𝐝 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐝𝐢𝐬𝐭𝐨𝐫𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐑𝐞𝐬𝐮𝐥𝐭 (%) = 𝐍𝐀𝐕 Notes: • For each asset, the weekly tradable amount shall be based on the manager’s assessment of the fund’s portfolio that is capable of being liquidated within one week. Such assignment should be based on the shortest period during which such a position could reasonably be liquidated at or near its carrying value4. • The maximum size of outflows the fund can face in one week without distorting the portfolio allocation is determined by (1) the sum of the weekly tradable amounts; and (2) the fund’s capacity to comply with the regulatory requirements. 4 For its definition, see the Guidelines on reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of the AIFMD ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 17 • For these purposes, the regulatory requirements are not limited to but should include at least: o Diversification (Article 17 of the MMF Regulation); o Concentration (Article 18 of the MMF Regulation); o Portfolio rules for short-term MMFs (Article 24 of the MMF Regulation) and for standard MMFs (Article 25 of the MMF Regulation), in particular, Maximum weighted average maturity (WAM); Maximum weighted average life (WAL), daily maturing assets; and weekly maturing assets. • For example, if 50% of a LVNAV MMF assets are tradable within a week but its WAM becomes higher than 60 days after selling 30%, the manager should report 30%. The calibration is available in section 5 of the Guidelines. 2) Weekly liquidity stress test: 61. The weekly liquidity stress test assesses the fund’s capacity to meet outflows with available weekly liquid assets, considered as the sum of highly liquid assets and weekly maturing assets and comprises the following steps: • managers of MMFs should apply a stressed redemption scenario where the fund receives net weekly redemption requests from 40% of the professional investors and 30% of the retail investors. • managers of MMFs should measure available weekly liquid assets to meet the redemption requests according to the following table: Assets Article CQS Assets referred to in Article 17(7)5 of the MMF Regulation which are highly liquid and can be redeemed and settled within one working 17(7) 1 day and have a residual maturity of up to 190 days. Cash which is able to be withdrawn by giving prior notice of five 24(1) working days without penalty. 25(1) 24(1) Weekly maturing assets 25(1) Reverse repurchase agreements which are able to be terminated by 24(1) giving prior notice of five working days 25(1) x100% = Weekly liquid assets (bucket 1) 5 Money market instruments issued or guaranteed separately or jointly by the Union, the national, regional and local administrations of the Member States or their central banks, the European Central Bank, the European Investment Bank, the European Investment Fund, the European Stability Mechanism, the European Financial Stability Facility, a central authority or central bank of a third country, the International Monetary Fund, the International Bank for Reconstruction and Development, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the Bank for International Settlements, or any other relevant international financial institution or organisation to which one or more Member States belong. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 18 Assets referred to in Article 17(7) of the MMF Regulation which can 17(7) 1,2 be redeemed and settled within one working week. Money market instruments or units or shares of other MMFs which 24(1) 1,2 they are able to be redeemed and settled within five working days. 25(1) Eligible securitisations and asset-backed commercial paper 9(1)(b) 1 (ABCPs). x85% = Weekly liquid assets (bucket 2) • Managers of MMFs should calculate the coverage of outflows by weekly liquid assets as a percentage in the following way: 𝐖𝐞𝐞𝐤𝐥𝐲 𝐥𝐢𝐪𝐮𝐢𝐝 𝐚𝐬𝐬𝐞𝐭𝐬 𝐑𝐞𝐬𝐮𝐥𝐭 (%) = 𝐖𝐞𝐞𝐤𝐥𝐲 𝐨𝐮𝐭𝐟𝐥𝐨𝐰𝐬 Notes: • Weekly liquid assets are classified in two buckets (bucket 1 and 2) according to their category and credit quality. CQS refers to “Credit Quality Steps”, within the meaning of the COMMISSION IMPLEMENTING REGULATION (EU) 2016/17996. • The sum of the weighted weekly liquid assets will be expressed in percentage of the redemption shock. For example, if a fund meets a redemption shock of 30% with 20% of bucket 1 liquid assets and 45% of total weekly liquid assets (buckets 1 and 2), the manager should report the ratio (Weekly liquid assets)/(Weekly outflows) as a result: o 20%/30% = 67% (bucket 1); and o 45%/30% = 150% (bucket 1 and 2). • It is important to note that the liquidity of any assets should always be checked in an appropriate manner. If there is any doubt regarding the liquidity of a security, managers of MMFs should not include it in the weekly liquid assets. The calibration is available in section 5 of the Guidelines. 3) Concentration stress test 6 https://eur-lex.europa.eu/legal- content/EN/TXT/?toc=OJ%3AL%3A2016%3A275%3ATOC&uri=uriserv%3AOJ.L_.2016.275.01.0003.01.ENG ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 19 62. The concentration stress test is a scenario where the MMF faces redemption requests from its two main investors. The impact of the stress test should be assessed according to weekly liquidity stress test methodology. 𝐖𝐞𝐞𝐤𝐥𝐲 𝐥𝐢𝐪𝐮𝐢𝐝 𝐚𝐬𝐬𝐞𝐭𝐬 𝐑𝐞𝐬𝐮𝐥𝐭 (%) = 𝐈𝐧𝐯𝐞𝐬𝐭𝐞𝐝 𝐚𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐭𝐰𝐨 𝐦𝐚𝐢𝐧 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬 Note: The calibration is available in section 5 of the Guidelines. 4.8.5 Macro-systemic shocks affecting the economy as a whole 63. With respect to the identification of macro-systemic shocks affecting the economy as a whole referred to in Article 28(1)(f) of the MMF Regulation, managers of MMFs should take the following steps: • measure the impact of a market shock combining different risk parameters in accordance with the table below; • assess the impact of a redemption shock following the market shock. Assets sold in response to the redemption shock will result in additional losses, as defined in the liquidity stress test; • calculate the result as a percentage of NAV; • calculate the value of weekly liquid assets after market shock as a percentage of outflows. Risk factors Parameters used for the calibration - FX Rate - EUR/USD etc. - Interest Rate - Swap rate Market shock - Credit - Gov. bond yields/ spreads - Spread among indices to - Corp. bond yields/ spreads which interest rates of portfolio securities are tied - Level of Redemption - % outflows Redemption shock - Asset liquidity - Bid/ask spread (discount factor) Results - % NAV ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 20 - Weekly liquid assets/ outflows Memo - % outflows 64. The impact of the macro stress test should be assessed taking into account the market shock and the liquidity impact from outflows. The reported impact should not include the outflows. 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕−𝐌𝐚𝐫𝐤𝐞𝐭 𝐬𝐡𝐨𝐜𝐤−𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐢𝐦𝐩𝐚𝐜𝐭 𝐟𝐫𝐨𝐦 𝐨𝐮𝐭𝐟𝐥𝐨𝐰𝐬 𝐌𝐚𝐜𝐫𝐨 𝐬𝐭𝐫𝐞𝐬𝐬 𝐭𝐞𝐬𝐭 𝐢𝐦𝐩𝐚𝐜𝐭 (%)= 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐍𝐀𝐕 65. The impact of the redemption shock should be assessed according to weekly liquidity stress test methodology. 𝐖𝐞𝐞𝐤𝐥𝐲 𝐥𝐢𝐪𝐮𝐢𝐝 𝐚𝐬𝐬𝐞𝐭𝐬 𝐑𝐞𝐬𝐮𝐥𝐭 (%) = 𝐖𝐞𝐞𝐤𝐥𝐲 𝐨𝐮𝐭𝐟𝐥𝐨𝐰𝐬 Notes: The scenario envisages the following circumstances: • The MMF is affected by a shock combining an adverse FX shock and an increase in interest rates including swap rate, government bond yields and corporate bond yields. The credit risk is included in the yield shock. Managers of MMFs should use their internal models to measure the combined impact. The calibration of the shock is based on a macro scenario provided by ESMA and the ESRB and combining shocks from the other scenarios. • In the wake of the market shock, investors ask for redemption. Outflows are calculated similarly to the redemption scenario by differentiating professional and retail investors, i.e. the calibration available in table 14 of section 5. • To meet the redemption requests, the fund sells assets in a stressed environment characterized by a widening of bid-ask spread as characterized in the liquidity stress test. For the purposes of the stress test, the loss is entirely borne by remaining investors (and not by redeeming investors). • The impact on the NAV is the result of the market shock and the liquidity shock. • The impact on liquidity is calculated using the weekly liquidity stress test methodology. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 21 The calibration is available in section 5 of the Guidelines. 5 Calibration 66. The following section includes the 2025 calibration for the MMF stress tests the results of which have to be reported in accordance with Article 37 of the MMF Regulation, and which are detailed in section 4.8 above. 67. ESMA has worked in collaboration with the ESRB and the ECB for the annual calibration of the risk parameters. Most of the parameters have been updated from the new ESRB adverse scenario. In addition, some parameters were added by ESMA in section 5 and are underlined. If managers need a parameter that is not indicated in this section, they may consult the adverse scenario on the ESRB website7. 68. Finally, in case of inconsistency between the Guidelines and the ESRB scenario, managers should use the values provided in the Guidelines. 7 Stress testing (europa.eu) ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 22 5.1 Common reference parameters of the stress test scenarios in relation to hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF Scope of the scenario MMFR Liquidity Typical assets Eligible assets Stressed Parameters -Certificate of deposit (CD) Yes Table 3, 4 -Commercial Paper (CP) Yes Table 3, 4 (a) money market instruments -Government bonds, treasury and local authority bills Yes Table 1,2, 4 -Corporate bonds Yes Table 3, 4 -Eligible securitisations Yes Table 3, 4 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -ABCPs Yes Table 3, 4 (c) deposits with credit institutions -Deposits, of which time deposits No -Financial derivative instruments dealt in on a regulated No (d) financial derivative instruments market -Financial derivative instruments dealt OTC No (e) repurchase agreements -Repos Yes 4 (f) reverse repurchase agreements -Reverse repos Yes 4 Extrapolation of the results to (g) units or shares of other MMFs -Shares issued by other MMFs Yes shares issued by other MMFs ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 23 Table 1 Table 2 Liquidity discount factor - Sovereign bonds by residual Liquidity discount factor - Sovereign bonds by rating and residual maturity - Reference countries (in %) maturity (in %) 3M 6M 1Y 1.5Y 2Y 3M 6M 1Y 1.5Y 2Y DE 0.08 0.10 0.12 0.16 0.20 AAA 0.08 0.11 0.14 0.17 0.20 ES 0.10 0.17 0.21 0.25 0.29 AA 0.08 0.11 0.12 0.17 0.21 FR 0.08 0.11 0.12 0.17 0.21 A 0.10 0.17 0.21 0.25 0.29 IT 0.09 0.15 0.17 0.22 0.26 BBB 0.10 0.17 0.21 0.25 0.29 Below BBB or 0.08 0.13 0.17 0.19 0.21 0.12 0.22 0.27 0.33 0.38 NL unrated Table 3 Liquidity discount factor - Corporate bonds by rating and residual maturity 3M 6M 1Y 1.5Y 2Y AAA 0.39 0.42 0.45 0.49 0.53 AA 0.41 0.43 0.45 0.49 0.53 A 0.41 0.44 0.48 0.52 0.56 BBB 0.41 0.47 0.50 0.53 0.56 Below BBB or unrated 0.54 0.62 0.64 0.69 0.73 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 24 Table Option 4: Price impact parameter Price impact parameter (%) Cash and deposits - Sovereign bonds 1E-13 Corporate bonds (non-financial) 4.3E-13 Corporate bonds (financial) 8E-13 Securitisation and ABCPs 4E-13 Shares issued by other MMFs 2.7E-13 Other (incl. repos) 4.7E-13 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 25 5.2 Common reference parameters of the stress test scenarios in relation to hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events Scope of the scenario Credit Credit MMFR Typical assets (credit spreads) (2 main counterparties) Eligible assets Stressed Parameters Stressed Parameters -Certificate of deposit (CD) Yes Table 6 Yes Table 7 -Commercial Paper (CP) Yes Table 6 Yes Table 7 (a) money market instruments -Government bonds, treasury and local Yes Table 5 Yes Table 7 authority bills -Corporate bonds Yes Table 6 Yes Table 7 (b) eligible securitisations and asset- -Eligible securitisations Yes Table 6 Yes Table 7 backed commercial paper (ABCPs) -ABCPs Yes Table 6 Yes Table 7 (c) deposits with credit institutions -Deposits, of which time deposits No No -Financial derivative instruments dealt in on a No No (d) financial derivative instruments regulated market -Financial derivative instruments dealt OTC No No (e) repurchase agreements -Repos No No (f) reverse repurchase agreements -Reverse repos No No Extrapolation Extrapolation of the results of the results (g) units or shares of other MMFs -Shares issued by other MMFs Yes to shares Yes to shares issued by issued by other MMFs other MMFs ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 26 Table 5: Shocks to government bond credit spreads Credit Spread by residual maturity - Government bonds (absolute changes - basis points) Geographic Area Country 3M 6M 1Y 2Y EU Austria 28 32 41 50 EU Belgium 40 46 57 70 EU Bulgaria 37 42 54 68 EU Croatia 34 39 50 63 EU Cyprus 37 42 54 68 EU Czech Republic 28 32 41 51 EU Denmark 21 25 32 40 EU Finland 28 32 41 51 EU France 44 52 65 74 EU Germany 25 29 37 47 EU Greece 59 72 91 110 EU Hungary 56 69 87 105 EU Ireland 25 29 37 48 EU Italy 55 67 81 100 EU Latvia 37 42 54 68 EU Lithuania 28 32 41 51 EU Luxembourg 21 25 33 41 EU Malta 29 33 43 53 EU Netherlands 23 27 35 43 EU Poland 51 59 69 80 EU Portugal 50 57 67 77 EU Romania 56 68 85 102 EU Slovakia 34 39 50 63 EU Slovenia 32 36 47 59 EU Spain 51 60 69 81 EU Sweden 21 25 33 41 EA (weighted averages) EA (weighted averages) 38 45 55 67 EU (weighted averages) EU (weighted averages) 38 45 55 66 Advanced economies United Kingdom 32 40 52 66 Advanced economies Switzerland 25 31 33 37 Advanced economies Norway 30 37 39 47 Advanced economies United States 42 54 61 79 Advanced economies Japan 11 13 19 21 Advanced economies Advanced economies non EU and non US 25 30 36 43 Emerging markets 95 120 135 144 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 27 Table 6: Shocks to corporate bond and ABS credit spreads (all maturities) Corporate credit spreads (absolute changes - basis points) Rating Non-financial Financial covered Financial ABS AAA 116 87 111 110 AA 128 104 129 126 A 154 116 156 187 BBB 196 157 194 254 BB 356 273 224 271 B 356 342 284 339 ≤CCC 356 385 322 382 Table 7: Loss given default Loss given default (%) Senior exposure 45 Subordinated exposure 75 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 28 5.3 Common reference parameters of the stress test scenarios in relation to hypothetical movements of the interest rates Scope of the scenario IR MMFR Typical assets (Interest rate swap) Eligible assets Stressed Parameters -Certificate of deposit (CD) Yes Table 8, 9 -Commercial Paper (CP) Yes Table 8, 9 (a) money market instruments -Government bonds, treasury and local authority bills Yes Table 8, 9 -Corporate bonds Yes Table 8, 9 (b) eligible securitisations and asset- -Eligible securitisations Yes Table 8, 9 backed commercial paper (ABCPs) -ABCPs Yes Table 8, 9 (c) deposits with credit institutions -Deposits, of which time deposits Yes Table 8, 9 -Financial derivative instruments dealt in on a Yes Table 8, 9 (d) financial derivative instruments regulated market -Financial derivative instruments dealt OTC Yes Table 8, 9 (e) repurchase agreements -Repos No (f) reverse repurchase agreements -Reverse repos Yes Table 8, 9 Extrapolation of the results to shares (g) units or shares of other MMFs -Shares issued by other MMFs Yes issued by other MMFs ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 29 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 30 Table 8: Shocks to swap rates Interest rate yield shocks absolute changes (basis points) Geographic Area Country Description 1M 3M 6M 1Y 2Y Euro area EU Interest rate swap on the EUR (euro) 83 88 97 100 106 Bulgaria EU Interest rate swap on the BGN (Bulgarian lev) 143 154 166 174 180 Czech Republic EU Interest rate swap on the CZK (Czech koruna) 104 110 123 130 136 Denmark EU Interest rate swap on the DKK (Danish krone) 86 93 100 103 108 Hungary EU Interest rate swap on the HUF (Hungarian forint) 115 123 137 152 170 Poland EU Interest rate swap on the PLN (Polish zloty) 121 129 138 148 159 Romania EU Interest rate swap on the RON (Romanian leu) 143 154 166 174 180 Sweden EU Interest rate swap on the SEK (Swedish krona) 84 91 100 106 112 Rest of Europe United Kingdom Interest rate swap on the GBP (British pound) 95 100 109 127 137 Rest of Europe Norway Interest rate swap on the NOK (Norwegian krone) 95 98 102 106 110 Rest of Europe Russia Interest rate swap on the RUB (Russian ruble) 231 257 286 319 355 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 31 Rest of Europe Switzerland Interest rate swap on the CHF (Swiss franc) 56 66 78 88 97 Rest of Europe Türkiye Interest rate swap on the TRY (Turkish lira) 114 122 132 141 152 North America Canada Interest rate swap on the CAD (Canadian dollar) 102 108 116 132 141 North America United States Interest rate swap on the USD (US dollar) 118 122 128 140 164 Australia and Pacific Australia Interest rate swap on the AUD (Australian dollar) 101 107 114 125 138 Australia and Pacific New Zealand Interest rate swap on the NZD (New Zealand dollar) 101 107 118 126 135 South and Central America Chile Interest rate swap on the CLP (Chilean peso) 164 180 198 206 213 South and Central America Colombia Interest rate swap on the COP (Colombian peso) 237 255 268 274 289 South and Central America Mexico Interest rate swap on the MXN (Mexican peso) 164 180 198 206 213 Asia China Interest rate swap on the CNY (Chinese yuan) 35 40 44 46 51 Asia Hong Kong Interest rate swap on the HKD (Hong Kong dollar) 114 122 131 140 144 Asia India Interest rate swap on the INR (Indian rupee) 114 130 143 150 168 Asia Japan Interest rate swap on the JPY (Japanese yen) 8 9 16 19 25 Asia Korea Interest rate swap on the KRW (South Korean won) 97 103 109 112 122 Asia Malaysia Interest rate swap on the MYR (Malaysian ringgit) 108 110 113 124 130 Asia Singapore Interest rate swap on the SGD (Singapore dollar) 101 103 107 116 129 Asia Thailand Interest rate swap on the THB (Thai baht) 102 103 107 117 125 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 32 Africa South Africa Interest rate swap on the ZAR (South African rand) 147 160 171 189 219 Table 9 Shocks to swap rates (default values for countries not included in table 8) Interest rate yield shocks absolute changes (basis points) Geographic Area Description 1M 3M 6M 1Y 2Y EU Default value for countries not included in table 8 110 118 129 136 144 Other advanced economies Default value for countries not included in table 8 84 89 96 105 114 Other emerging markets Default value for countries not included in table 8 153 166 180 192 207 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 33 5.4 Common reference parameters of the stress test scenarios in relation to hypothetical movements of the exchange rates Scope of the scenario FX FX MMFR Typical assets (Appreciation of the EUR) (Depreciation of the EUR) Eligible assets Stressed Parameters Stressed Parameters -Certificate of deposit (CD) Yes Table 10 Yes Table 11 -Commercial Paper (CP) Yes Table 10 Yes Table 11 (a) money market instruments -Government bonds, treasury and local Yes Table 10 Yes Table 11 authority bills -Corporate bonds Yes Table 10 Yes Table 11 -Eligible securitisations Yes Table 10 Yes Table 11 (b) eligible securitisations and asset- backed commercial paper (ABCPs) -ABCPs Yes Table 10 Yes Table 11 (c) deposits with credit institutions -Deposits, of which time deposits Yes Table 10 Yes Table 11 -Financial derivative instruments dealt in on a Yes Table 10 Yes Table 11 (d) financial derivative instruments regulated market -Financial derivative instruments dealt OTC Yes Table 10 Yes Table 11 (e) repurchase agreements -Repos No No (f) reverse repurchase agreements -Reverse repos Yes Table 10 Yes Table 11 Extrapolation of Extrapolation the results to of the results to (g) units or shares of other MMFs -Shares issued by other MMFs Yes Yes shares issued shares issued by other MMFs by other MMFs ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 34 Table 10 FX shocks (appreciation of the EUR against the USD) relative changes (%) Exchange rate Geographic Area Description Shock name EU EURCZK represents 1 EUR per x CZK (Czech koruna) EURCZK 6 EU EURHUF represents 1 EUR per x HUF (Hungarian forints) EURHUF 18 EU EURPLN represents 1 EUR per x PLN (Polish zloty) EURPLN 15 EU EURRON represents 1 EUR per x RON (Romanian leu ) EURRON 3 EU EURSEK represents 1 EUR per x SEK (Swedish krona) EURSEK 11 Rest of Europe EURRSD represents 1 EUR per x RSD (Serbian dinar ) EURRSD 2 Rest of Europe EURNOK represents 1 EUR per x NOK (Norwegian krone) EURNOK 9 Rest of Europe EURGBP represents 1 EUR per x GBP (British pound) EURGBP 10 Rest of Europe EURCHF represents 1 EUR per x CHF (Swiss franc) EURCHF 5 Rest of Europe EURRUB represents 1 EUR per x RUB (Russian ruble) EURRUB 45 Rest of Europe EURTRY represents 1 EUR per x TRY (Turkish lira) EURTRY 21 North America USDCAD represents 1 USD per x CAD (Canadian dollar) USDCAD -6 North America EURUSD represents 1 EUR per x USD (US dollar) EURUSD 9 Australia and Pacific AUDUSD represents 1 AUD per x USD (Australian dollar) AUDUSD 9 Australia and Pacific NZDUSD represents 1 NZD per x USD (New Zealand dollar) NZDUSD 8 South and Central America USDARS represents 1 USD per x ARS (Argentine peso) USDARS -17 South and Central America USDBRL represents 1 USD per x BRL (Brazilian real) USDBRL -18 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 35 South and Central America USDMXN represents 1 USD per x MXN (Mexican peso) USDMXN -7 USDCNY represents 1 USD per x CNY (Chinese yuan Asia USDCNY -4 renminbi) Asia USDHKD represents 1 USD per x HKD (Hong Kong dollar) USDHKD -1 Asia USDINR represents 1 USD per x INR (Indian rupee) USDINR -2 Asia USDJPY represents 1 USD per x JPY (Japanese yen) USDJPY -8 Asia USDKRW represents 1 USD per x KRW (South korean won) USDKRW -10 Asia USDMYR represents 1 USD per x MYR (Malaysian ringgit) USDMYR -5 Asia USDSGD represents 1 USD per x SGD (Singapore dollar) USDSGD -5 Asia USDTHB represents 1 USD per x THB (Thai baht) USDTHB -6 USDTWD represents 1 USD per x TWD (New Taiwan -3 Asia dollar) USDTWD Africa USDZAR represents 1 USD per x ZAR (South African rand) USDZAR -11 Table 11 FX shocks (depreciation of the EUR against the USD) relative changes (%) Exchange rate Geographic Area Description Shock name EU EURCZK represents 1 EUR per x CZK (Czech koruna) EURCZK -5 EU EURHUF represents 1 EUR per x HUF (Hungarian forints) EURHUF -7 EU EURPLN represents 1 EUR per x PLN (Polish zloty) EURPLN -4 EU EURRON represents 1 EUR per x RON (Romanian leu ) EURRON -2 EU EURSEK represents 1 EUR per x SEK (Swedish krona) EURSEK -2 Rest of Europe EURRSD represents 1 EUR per x RSD (Serbian dinar ) EURRSD -1 Rest of Europe EURNOK represents 1 EUR per x NOK (Norwegian krone) EURNOK -8 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 36 Rest of Europe EURGBP represents 1 EUR per x GBP (British pound) EURGBP -5 Rest of Europe EURCHF represents 1 EUR per x CHF (Swiss franc) EURCHF -9 Rest of Europe EURRUB represents 1 EUR per x RUB (Russian ruble) EURRUB -40 Rest of Europe EURTRY represents 1 EUR per x TRY (Turkish lira) EURTRY -4 North America USDCAD represents 1 USD per x CAD (Canadian dollar) USDCAD 9 North America EURUSD represents 1 EUR per x USD (US dollar) EURUSD -12 Australia and Pacific AUDUSD represents 1 AUD per x USD (Australian dollar) AUDUSD -13 Australia and Pacific NZDUSD represents 1 NZD per x USD (New Zealand dollar) NZDUSD -13 South and Central America USDARS represents 1 USD per x ARS (Argentine peso) USDARS 18 South and Central America USDBRL represents 1 USD per x BRL (Brazilian real) USDBRL 14 South and Central America USDMXN represents 1 USD per x MXN (Mexican peso) USDMXN 12 USDCNY represents 1 USD per x CNY (Chinese yuan Asia USDCNY 7 renminbi) Asia USDHKD represents 1 USD per x HKD (Hong Kong dollar) USDHKD 1 Asia USDINR represents 1 USD per x INR (Indian rupee) USDINR 8 Asia USDJPY represents 1 USD per x JPY (Japanese yen) USDJPY 14 Asia USDKRW represents 1 USD per x KRW (South korean won) USDKRW 11 Asia USDMYR represents 1 USD per x MYR (Malaysian ringgit) USDMYR 6 Asia USDSGD represents 1 USD per x SGD (Singapore dollar) USDSGD 5 Asia USDTHB represents 1 USD per x THB (Thai baht) USDTHB 9 USDTWD represents 1 USD per x TWD (New Taiwan 7 Asia dollar) USDTWD Africa USDZAR represents 1 USD per x ZAR (South African rand) USDZAR 17 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 37 5.5 Common reference parameters of the stress test scenarios in relation to hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied Scope of the scenario IR MMFR Typical assets (Interest rate swap) Eligible assets Stressed Parameters -Certificate of deposit (CD) Yes Table 8, 9 -Commercial Paper (CP) Yes Table 8, 9 (a) money market instruments -Government bonds, treasury and local authority bills Yes Table 8, 9 -Corporate bonds Yes Table 8, 9 -Eligible securitisations Yes Table 8, 9 (b) eligible securitisations and asset-backed commercial paper (ABCPs) -ABCPs Yes Table 8, 9 (c) deposits with credit institutions -Deposits, of which time deposits Yes Table 8, 9 -Financial derivative instruments dealt in on a regulated Yes Table 8, 9 (d) financial derivative instruments market -Financial derivative instruments dealt OTC Yes Table 8, 9 (e) repurchase agreements -Repos No (f) reverse repurchase agreements -Reverse repos Yes Table 8, 9 Extrapolation of the results to shares (g) units or shares of other MMFs -Shares issued by other MMFs Yes issued by other MMFs ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 38 5.6 Common reference parameters of the stress test scenarios in relation to hypothetical levels of redemption Scope of the scenario Redemption Redemption Redemption MMFR Typical assets (reverse liquidity ST) (weekly liquidity ST (2 main investors) Eligible assets Stressed Parameters Stressed Parameters Stressed Parameters -Certificate of deposit (CD) Yes Self-assessment Yes Table 12, 13 Yes Table 12 -Commercial Paper (CP) Yes Self-assessment Yes Table 12, 13 Yes Table 12 (a) money market instruments -Government bonds, treasury and Yes Self-assessment Yes Table 12, 13 Yes Table 12 local authority bills -Corporate bonds Yes Self-assessment Yes Table 12, 13 Yes Table 12 (b) eligible securitisations and -Eligible securitisations Yes Self-assessment Yes Table 12, 13 Yes Table 12 asset-backed commercial paper -ABCPs Yes Self-assessment Yes Table 12, 13 Yes Table 12 (ABCPs) (c) deposits with credit -Deposits, of which time deposits Yes Self-assessment Yes Table 12, 13 Yes Table 12 institutions -Financial derivative instruments Yes Self-assessment Yes Table 12, 13 Yes Table 12 (d) financial derivative dealt in on a regulated market instruments -Financial derivative instruments Yes Self-assessment Yes Table 12, 13 Yes Table 12 dealt OTC (e) repurchase agreements -Repos Yes Self-assessment No Table 12, 13 No Table 12 (f) reverse repurchase -Reverse repos Yes Self-assessment Yes Table 12, 13 Yes Table 12 agreements (g) units or shares of other MMFs -Shares issued by other MMFs Yes Self-assessment Yes Table 12, 13 Yes Table 12 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 39 Table 12 Table 13 Assets Article CQS Net outflows (%) Assets referred to in Article 17(7) which are highly liquid and 17(7) 1 Professional investor 40 can be redeemed and settled within one working day and have a residual maturity of up to 190 days 24(1) Cash which is able to be withdrawn by giving prior notice of Retail investor 30 five working days without penalty 25(1) 24(1) Weekly maturing assets 25(1) 24(1) Reverse repurchase agreements which are able to be terminated by giving prior notice of five working days 25(1) x100% = Weekly liquid assets (bucket 1) Assets referred to in Article 17(7) which can be redeemed and 17(7) 1,2 settled within one working week Money market instruments or units or shares of other MMFs 24(1) which they are able to be redeemed and settled within five 1,2 25(1) working days Eligible securitisations and asset-backed commercial paper 9(1)(b) 1 (ABCPs) x85% = Weekly liquid assets (bucket 2) ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 40 5.7 Common reference parameters of the stress test scenarios in relation to hypothetical macro systemic shocks affecting the economy as a whole Scope of the scenario MMFR Macro Typical assets Eligible assets Stressed Parameters -Certificate of deposit (CD) Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 -Commercial Paper (CP) Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (a) money market instruments -Government bonds, treasury and local authority Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 bills -Corporate bonds Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (b) eligible securitisations and asset-backed -Eligible securitisations Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 commercial paper (ABCPs) -ABCPs Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (c) deposits with credit institutions -Deposits, of which time deposits Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 -Financial derivative instruments dealt in on a Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (d) financial derivative instruments regulated market -Financial derivative instruments dealt OTC Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (e) repurchase agreements -Repos No Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (f) reverse repurchase agreements -Reverse repos Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 (g) units or shares of other MMFs -Shares issued by other MMFs Yes Tables 1,2,3,4,5,6,7,8,10,11, 12, 14 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 41 Table 14 Net outflows (%) Professional investor 20 Retail investor 10 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - Tel. +33 (0) 1 58 36 43 21 - www.esma.europa.eu 42 ESMA REGULAR USE 6 Appendix A. Example of stress combining the various factors mentioned in sections 4.2 to 4.7 with investors’ redemption requests A practical example of one possible implementation of the section “Combination of the various factors mentioned in the following sections 4.2 to 4.7 with investors’ redemption requests” is given below. The table below estimates the losses incurred by the MMF in the event of redemptions or market stress (credit or interest rate shocks). First scenario: credit premium shock of 25 bps Second scenario: interest rate shock of 25 bps Three largest Very stable investors investors (25%) (15%) ↓ ↓ Redemptions 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Initial 11 12 2 bps 3 bps 5 bps 6 bps 8 bps 9 bps portfolio bps bps First 13 18 24 32 45 66 110 236 7 bps 9 bps scenario bps bps bps bps bps bps bps bps Second 12 16 21 28 38 85 3 bps 4 bps 6 bps 9 bps scenario bps bps bps bps bps bps WAL (days) 105 117 131 149 169 192 219 249 290 320 This stress test shows that a redemption by the three largest investors (25% of net assets) would push the weighted average life (WAL) beyond the 120-day regulatory threshold (for a short-term money market fund) and cause the portfolio to lose in the region of 2-3 bps under normal conditions. The same level of cumulative redemptions with a 25 bps rise in credit premium would cause a loss of around 13-18 bps. 43 ESMA REGULAR USE B. Example of redemptions based on an investor behaviour model, in accordance with the breakdown of liabilities by investor category. This implies the simulation of the behaviour of each type of investor and establishes a simulation based on the composition of the liabilities of the MMF. Example of investor Record redemptions for this classification and simulation investor type of their behaviour (the figures shown are not real): Investor type Over one Over one week Over one day month Large institutional 25% 75% 100% Group entity 20% 40% 40% (bank, insurance, own account) Investment fund 20% 65% 100% Small institutional 10% 25% 40% Private banking 15% 40% 75% network Retail investor 5% 10% 20% with distributor A Retail investor 7% 15% 20% with distributor B Stressed redemptions for this investor category Large institutional 75% Group entity 0% (bank, insurance, (in agreement own account) with the AMC) Investment fund 65% Small institutional 25% Private banking 40% network Retail investor 10% with distributor A Retail investor 15% with distributor B In order to build such a simulation of this kind, the manager needs to make assumptions about the behaviour of each investor type, based in part on historical redemptions. In the example 44 ESMA REGULAR USE above, the manager has noted that the retail investors who invested through distributor A are historically slower to exit in the event of difficulty, but that they exhibit the same behaviour over one month as retail investors who invested through distributor B. This fictitious example shows a possible classification that the manager may use based on the data available on the liabilities of the MMF and the behaviour of its investors. C. Examples of global stress test scenarios that the manager could consider: i. the Lehman Brothers’ event with the calibration of all relevant factors one month ahead of the failure of this firm; ii. A) a scenario including a combination of the 3 following factors: i) a parallel shift in interest rate (x) ii) a shift in credit spreads (y) and iii) a redemption stress (z)); iii. B) a scenario including a combination of the 3 following factors: i) a parallel shift in interest rate (x) ii) a shift in credit spreads (y) and iii) a redemption stress (z)) Variables x, y and z being the worst figures/shifts experienced by the fund, on an independent basis, for the last 12 months. 45

ESMA50-481369926-30848 Guidelines on stress test scenarios under the MMF Regulation

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