European Commission - Adequacy of macroprudential policies for Non-Bank Financial Intermediation (NBFI) - March 2025
The European Commission published in March 2025 a Summary Report of the responses to their consultation (see below) on the adequacy of macroprudential policies for Non-Bank Financial Intermediation (NBFI). The European Commission will be using this feedback to inform the policy planning of the 2024-2029 College of Commissioners.
In 2024, the European Commission consulted on the adequacy of the EU's macroprudential framework for NBFI. They wanted to identify the vulnerabilities and risks of NBFIs and map the existing macroprudential framework for NBFIs. The consultation paper identified what the European Commission believed to be the key vulnerabilities stemming from NBFIs:
- unmitigated liquidity mismatches
- the build-up of excessive leverage
- interconnectedness among NBFI sectors and between NBFI and banks
Also, the European Commission were gathering feedback on current challenges to macroprudential supervision and areas for further improvement. They believed that a lack of consistency and coordination among macroprudential frameworks across the EU could exacerbate the negative impact of such vulnerabilities, leading to unaddressed systemic risks.
AREF collaborated with other EREF members on its response. A copy of the response can be requested from RE:UK
The European Securities and Markets Authority (ESMA) submitted its own response to the EC's consultation. In their response, ESMA recognised the progress in relation to the provision of liquidity management tools in AIFMD. However, ESMA still considered that there is a need to address some remaining issues concerning liquidity mismatches in open-ended funds. In particular, they support the Recommendation of the Financial Stability Board that competent authorities could require funds that invest in assets that are not liquid to be structured as closed-ended funds. This wasn't supported by AREF in its response to the FSB consultation on Addressing Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds.
Central Bank of Ireland - Macroprudential policy for investment funds - July 2024
In July 2024, the Central Bank of Ireland (CBI) published its Feedback Statement to its Discussion Paper (DP11): An approach to macroprudential policy for investment funds.
DP11 was seeking feedback on a number of issues.
These included:
- The channels through which investment funds can generate systemic risk
- The current regulatory framework for investment funds
- The key proposed objectives and principles of macroprudential policy for investment funds
- The design and deployment of macroprudential tools for investment funds
- Key considerations for operationalising a macroprudential framework for investment funds.
AREF sent a short response to the Discussion Paper in November 2023. A copy of the response can be requested from RE:UK.
CBI's Feedback Statement summarised the responses received to DP11 and CBI's perspective on the key themes raised by respondents.
CBI will continue to actively contribute to ongoing work at the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) to strengthen resilience of non-bank financial institutions. The CBI will also be contributing to the European Commission’s consultation on a macroprudential framework for non-bank financial intermediation.
Domestically, CBI is focussing on evaluating the implementation of the two macroprudential measures already introduced, for Irish authorised property funds and Irish authorised GBP-denominated LDI funds. They will continue to actively monitor the sector for evolving financial vulnerabilities and to deepen their understanding of the nature and magnitude of systemic risk across different fund cohorts, through ongoing analysis and research.
Central Bank of Ireland - Macroprudential policy for property funds - November 2022
In November 2022 the Central Bank of Ireland ('CBI') published its Feedback Statement to CP145: Macroprudential measures for the property fund sector. From November 2021 to February 2022, they consulted on a proposal to introduce macroprudential limits on leverage and to provide guidance to limit liquidity mismatch for Irish-authorised property funds (subject to AIFMD). AREF didn't respond to the consultation as the proposed measures didn't affect current AREF Fund Members.
The core elements of the measures put forward in CP145 were retained in the final policy measures with a few adjustments as set out in the Feedback Statement. CBI has introduced two policies that are part of its framework on property funds macroprudential policy:
- A sixty per cent leverage limit on the ratio of property funds’ total debt to their total assets and;
- Guidance to limit liquidity mismatch for property funds.
The measures apply to Alternative Investment Fund Managers ('AIFMs') of Alternative Investment Funds (AIFs”') that are domiciled in Ireland, authorised under domestic legislation, and investing fifty per cent or more directly or indirectly in Irish property assets.
CBI have provided a five year implementation period to allow for the gradual and orderly adjustment of leverage in existing property funds. They have provided an 18 month implementation period for existing funds to take appropriate actions in response to the Guidance. CBI will only authorise new funds if they meet the sixty per cent leverage limit, while it expects that property funds authorised on or after 24 November 2022 would adhere to the Guidance from inception.
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