European Securities and Markets Authority publishes draft standards and guidelines to harmonise liquidity management tools for EU funds

The European Securities and Markets Authority has published draft Regulatory Technical Standards and a final report on Guidelines on Liquidity Management Tools, setting out a harmonised EU framework for the use and operation of these tools by fund managers. The package is intended to strengthen funds’ ability to manage liquidity, particularly under market stress, and supports implementation of the revised Alternative Investment Fund Managers Directive and the UCITS Directive. The draft standards clarify how liquidity management tools should function across Member States, including the use of side pockets where existing national rules vary significantly. ESMA also links the framework to financial stability risk mitigation and the broader debate on non-bank financial intermediation. The draft Regulatory Technical Standards have been submitted to the European Commission for adoption, which must decide within three months of submission, with a possible one-month extension. After Commission adoption, ESMA will translate the Guidelines and will adjust them if Commission changes to the standards affect consistency. Once translations are published, national competent authorities will have two months to notify ESMA whether they comply or intend to comply, and the Guidelines will apply from the date the standards enter into force, with pre-existing funds given twelve months to comply.