Macroprudential Weaknesses in EU's Alternative Investment Fund Managers Directive to Be Addressed in AIFMD Review

The European Systemic Risk Board has published a letter (dated February 3, 2020) to the European Commission on the weaknesses of the Alternative Investment Fund Managers Directive. The ESRB is responsible for macro-prudential oversight within the European Union. The AIFMD framework provides the ESRB with data to assist it to analyze systemic risks. The ESRB considers that the AIFMD reporting framework could be improved and wants the Commission to consider these issues as part of the review of the AIFMD. The letter sets out the ESRB's experiences with the scope and application of the AIFMD, in particular considering:

1. The suitability of the reporting framework and access to data for monitoring systemic risk: the ESRB highlights that the AIFMD framework could be improved, particularly with regards to fund identification, fund classification, information on the interconnectedness of funds, information on leverage and liquidity risk, reporting frequency and access to data.
2. The need to operationalize existing macroprudential policy instruments: the ESRB states that it is important to achieve a consistent application across the EU of the policies due to the cross-border nature of Alternative Investment Funds.
3. The ongoing development of a macroprudential policy framework for investment funds: the ESRB notes that the International Organization of Securities Commissions is developing recommendations on liquidity risk management practices of open-ended funds, and that the implementation of those will be assessed during 2020. EU work on this aspect is ongoing and the ESRB notes that if that framework is not developed in time to be included in the AIFMD review then a further review will need to take place.

View the ESRB's letter.

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