Macroprudential Policy for Investment Funds

The funds sector is diverse, with different types of fund cohorts presenting different systemic risk profiles. This needs to be accounted for in any systemic risk assessment as well as policy deliberations.

Overall, as the funds sector has continued to grow and become more integral to the wider functioning of several key financial markets, the regulatory framework needs to evolve. The current regulatory framework for the funds sector – which has been largely designed around the protection of investors – helps address some funds-specific elements that can contribute to systemic risk.  However, as evidenced by recent episodes, the current framework has not been sufficient to reduce the propensity of certain fund cohorts to amplify shocks in times of stress.

A macroprudential perspective is therefore needed in the regulation of the funds sector. Significant progress in this direction has been made recently, including through the FSB’s and IOSCO’s package of measures on MMF resilience and on liquidity management of OEFs.  As the nature of systemic risk is multi-faceted and constantly evolving, developing an overarching macroprudential framework for the funds sector would strengthen the overall regulatory architecture. In turn, this would better equip the sector to serve as a resilient form of financing, supporting broader economic activity. 

Infographic Macroprudential Policy for Investment Funds

Discussion Paper

This Discussion Paper (DP11) aims to advance the discussion on how a comprehensive macroprudential perspective in the regulation of the funds sector could be achieved. It covers what the objectives of a macroprudential framework would be; outlines key principles that could underpin its design; discusses potential tools that could be used to achieve these macroprudential objectives; and considers a range of practical issues that would need to be progressed to make such a framework operational.  DP11 seeks views on a number of issues relating to the fund sector, including:

  • Systemic risks
  • The current regulatory framework
  • The objectives and principles of macroprudential policy
  • The design of macroprudential tools
  • Considerations for operationalising this framework.

DP11 is structured as follows:

Have Your Say

Central Bank of Ireland invites interested stakeholders to provide written responses to the questions contained throughout our Discussion Paper. You are also invited to provide any general observations on the matters discussed or issues raised.

The closing date for submissions is 15 November 2023.

DP 11 - An approach to macroprudential policy for investment funds | pdf 1207 KB

Next steps

Once all feedback has been collated post 15 November 2023, we will publish a feedback statement covering some or all of the topics raised in the written responses. This feedback will help inform the Central Bank’s participation in any international or European regulatory discussions on the topic, and inform further analysis and policy work in this area.