12 Mar 2021

On 26 February, the International Organisation of Securities Commissions (IOSCO) published its work programme which outlines its priorities and key deliverables for the next two years (2021-2022). As expected, the work programme reflects a strategic shift for IOSCO in the post-COVID-19 era, with a particular focus on addressing financial stability and investor protection concerns following the 2020 March market turmoil.

This note summarises the main elements of the IOSCO 2021-2022 work programme as they relate to the investment management industry. It also describes the impact of the IOSCO’s work streams on upcoming European legislative initiatives, as well as the IA’s ongoing work through its International and European Policy Committee.

IOSCO priorities for 2021-2022:

As expected, the impact of the COVID-19 pandemic continues to influence the global policy agenda, with the IOSCO work programme responding to a number of emerging issues as a result of the March 2020 market turmoil and perceived ongoing risks to financial stability. In summary, the main deliverables in the work programme include:

  • Financial stability concerns on Non-Bank Financial Intermediation (NFBI) - Mirroring the FSB’s Work Programme, IOSCO will primarily focus on addressing potential ‘structural and regulatory vulnerabilities’ in the investment management industry that emerged during the COVID-19 market induced stress. The programme foresees a very dense list of reports and policy proposals - especially regarding MMFs, OEFs, and ETFs – which includes:  
    • Money Market Funds (MMFs) – Joint FSB and IOSCO policy proposals to enhance MMF resilience (October 2021)
    • Open-ended funds (OEFs) –  Joint FSB and IOSCO analysis on the availability, use and impact of liquidity risk management tools for OEFs (Q4 2021)
    • Exchange-traded funds (ETFs) – Policy proposals on ETFs resilience based on observations and evidence gathered during the crisis (Q4 2021)
    • Corporate bond market – Analysis of the market microstructure and liquidity provision in corporate bond markets (Q3 2021); and a Report on the resilience of corporate bond markets during the crisis (Q4 2021)
    • Margin dynamics – Report on margin dynamics in cleared and uncleared markets (Q4 2021)
    • Fund valuations – Report on portfolio valuations during the March market turmoil (2022)
    • Corporate debt and leveraged finance – Report on conduct-related issues in the leveraged loans and CLO markets (Q4 2021)
    • Leverage in investment funds – Global leverage report in investment funds (Q4 2021)
  • Investor protection concerns related to remote working arrangements – The programme foresees the publication of reports by 2022 looking specifically at:  (1) misconduct risks, (2) operational, cyber security and business continuity plan risks, and (3) fraud scams that emerged in light of the transition to remote working arrangements, as well as cyber-security and outsourcing arrangements.  
  • Continuation of work on 2020 work programme deliverables:
    • Sustainable finance – IOSCO will continue its work on identifying sustainability-related disclosures for issuers and managers, as well as for CRAs, ESG ratings and data providers: Report on sustainability-related disclosures for issuers (June 2021); Report on sustainability-related disclosures for asset managers (Q4 2021); Report on ESG ratings and ESG data providers (Q4 2021)
    • Digital finance – Review of the IOSCO’s Stablecoin standards (2021), Report on the use of Artificial Intelligence and Machine Learning (Q2 2021), and Report on online marketing and distribution (Q3 2021)
    • Index investing – Thematic analysis of the impact of passive investing growth on equity market (Q2 2021); and Report on conduct-related issues in index provision (Q4 2021)
    • Market fragmentation – Annual report on market fragmentation and report on supervisory colleges good practices (2021)

Impact on the investment management industry:

The work programmes of both FSB and IOSCO clearly signal that a more evidence-based approach is now taking place at the international level in an effort to fix ‘structural problems’ and financial stability issues regarding MMFs, liquidity management tools, and leverage requirements for investment funds. The FSB and IOSCO workstreams foreseen for the next year will likely be considered by the European Commission in the upcoming AIFMD review (Q3 2021) and MMFR review (Q4 2021):  

  • AIFMD review –Financial stability is a key topic in the upcoming review, with potential changes including the harmonisation of available liquidity management tools across Member States as well as enhancing national competence authorities and ESMA powers. The FSB and IOSCO will likely play key roles in identifying financial stability concerns that need to be tackled and influence co-legislators when debating the Commission’s legislative proposal.
  • MMFR review – Originally scheduled for mid-2022, the Commission signalled it will move up the review to end of this year as a response to international pressure to address MMF’s vulnerabilities. International regulators will likely be driving forces as we understand ESMA is deferring to them for discussion on the commercial paper market.

Next steps:

The IA have set as a key priority for this year to step up their engagement with international regulators, particularly FSB and IOSCO. The IA's International and European Policy Committee will discuss the implications of the IOSCO's Work Programme at its next meeting. This will run alongside IA policy and advocacy workstreams looking at similar issues at UK and EU level, in particular the current work of the Bank of England Financial Policy Commitee (FPC) on fund liquidity issues taking place jointly with the FCA.  This will clearly determine both the UK domestic position in the near term and feed into the deliberations taking place among regulators at international level. 

The IA’s key thematic areas of interest remain as follows:

  • The narrative around the role of the fund and broader investment management industry in the financial stability debate, particularly in the context of the analysis now taking place of the March 2020 capital market dislocation
  • The liquidity management toolkit for investment funds, including approaches to liquidity measurement and the greater use of tools such as notice periods to facilitate investment in less liquid or illiquid assets.
  • The regulatory approach to MMFs.


Jacqui Bungay

Jacqui Bungay

AREF Policy Secretariat , AREF

Jacqui provides policy guidance and secretariat services to the AREF Board and AREF Management Committee as well as the following AREF Committees: Corporate Governance, ESG & Impact Investing, Investor, Public Affairs, Research and Information and Retails Funds. In addition, Jacqui monitors members’ compliance with AREF’s Code of Practice. 

Jacqui joined AREF in 2014 after working for over 25 years in fund compliance, client relationships and administration at Natwest Trustee & Depositary Services.