International Organization of Securities Commissions Publishes Framework for Monitoring Leverage in Funds
12/13/2019The International Organization of Securities Commissions has published a framework designed to facilitate regulators’ monitoring of leverage in investment funds, assisting regulators in identifying potential risks to financial stability. Funds’ use of leverage is a source of concern, as it can amplify investment fund returns and losses and may impair the proper functioning of markets. IOSCO’s final Framework follows the consultation it published on the proposed Framework in November 2018.
The framework consists of two steps:
- Analysis of a fund’s market exposure to allow regulators to identify funds that are more likely to pose risks to the financial system; and
- Further analysis of those funds identified in Step 1, taking into account the particular risks relevant to individual funds, to assist national regulators in monitoring leverage-related risks for financial stability purposes.
IOSCO also recommends that all jurisdictions make certain leverage data publicly available, or at least available to IOSCO. IOSCO intends to begin aggregating this data from 2020 and publish annual reports reflecting global leverage trends within the asset management industry, with the first report intended to be published in 2021.
View IOSCO's Framework.
View details of IOSCO's consultation paper.
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