Article archive

2025-01-01EuropeEuropean Central Bank

European Central Bank develops framework combining AIFMD, EMIR and SFTR data to assess leverage risks in EU alternative investment funds

The European Central Bank's Macroprudential Bulletin outlines a framework to assess financial stability risks from leveraged alternative investment funds (AIFs), highlighting hedge funds and liability-driven investment (LDI) funds as most vulnerable. Using AIFMD, EMIR, and SFTR data, it reveals LDI funds' sensitivity to interest rate shocks and significant leverage in relative value hedge funds. Stress tests indicate substantial potential losses for LDI funds under interest rate shifts, with a broader European Systemic Risk Board analysis forthcoming.

Research
2025-01-01EuropeEuropean Central Bank

European Central Bank research suggests Financial Stability Board minimum repo haircut floors would cut euro area non-bank repo leverage by around 13%

The European Central Bank's Macroprudential Bulletin evaluates the Financial Stability Board's proposed minimum haircut framework for non-centrally cleared securities financing transactions, finding it would reduce leverage among euro area non-bank financial intermediaries. The analysis shows a 13% reduction in leverage on repo, with the largest borrowers experiencing a 42% decrease. The impact varies, with smaller declines for entities at the 75th and 90th percentiles.

ResearchMacroprudential policy and tools