Financial supervisors in Luxembourg and elsewhere in Europe on Monday stepped up their efforts to maintain financial stability, protect investors and ensure the orderly functioning of markets as part of the European Union’s overall response to the “tragic consequences” of Russia’s military aggression.
The European Securities and Market Authority, Esma, said it is closely monitoring the impact of the Ukraine crisis on financial markets and that it “is prepared to use its relevant tools to ensure the orderly functioning of markets, financial stability and investor protection. This is part of the European Union’s overall response to the tragic consequences of Russia’s military aggression.”
Luxembourg’s financial regulator CSSF said it had begun its valuation assessment of investment funds by requiring a sample of managers to report data. Its assessment relates to Ucits funds and open-ended alternative investment funds on less liquid assets such as unlisted equities and bonds, corporate debt, real estate and high yield bonds.
‘Of utmost importance’
The CSSF action is part of a EU-wide valuation assessment under Esma’s coordination effort announced late January, before Russia’s invasion of Ukraine, as an exercise “of utmost importance” to assess valuation risks which “may pose a potential threat to financial stability”.
On Monday, Esma described its effort to monitor issues relating to the valuation of assets is part of a move to reinforce its coordination role among national supervisors such as CSSF, as well as AFM in the Netherlands and FSMA in Belgium, to analyse market developments and supervisor risks with a focus on liquidity issues.
Esma outlined a number of specific supervisory and coordination activities, including volatility and margin developments in energy and commodity markets, as well as the impact on clearing. It also is in contact with credit rating agencies to ensure “sufficient transparency around ratings” and monitoring the impact of sanctions on the operations of agencies.
Esma supporting sanctions implementation
Benchmark administrators are required to verify the impact of market developments and sanctions on the provided benchmarks, while supervisors are also monitoring secondary markets. Esma said it is supporting central securities depositories with the consistent implementation of sanctions in their operations.
In regards to cyber security, Esma is facilitating the collection and sharing of information among national supervisors about cyber incidents.
Esma said financial market participants should ensure they comply with the relevant EU sanctions and monitor for any further restrictions. The European Commission will provide clarity and answer queries on the scope and implementation of these and ESMA is supporting the EC in collecting such queries, it said.
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