International Body Proposes Framework for Assessing Fund Leverage

The International Organization of Securities Commissions has launched a consultation on a proposed framework to help assess leverage used by investment funds. The consultation follows a recommendation to IOSCO from the Financial Stability Board in its January 2017 report, "Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities." The FSB recommended, among other things, that IOSCO should identify and/or develop consistent measures of leverage in funds to facilitate more meaningful monitoring of leverage for financial stability purposes and help enable direct comparisons across funds and at a global level.

The consultation sets out a proposed framework comprising a two-step process aimed at achieving a meaningful and consistent assessment of global leverage for funds, as part of an effort to address risks that may arise from certain asset management activities. The first step would use the measures of leverage identified and/or developed, with a view to identifying and analyzing funds that may pose a risk to financial stability. The second step would involve further analysis of this sub-set of funds.

Comments on the consultation are invited by February 1, 2019.

View the consultation paper.

View the FSB's January 2017 report.

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