Page 54 - SC Annual Report 2018 (ENG)

Securities
Commission
Malaysia
ANNUAL
REPORT
2018

thematic review on Liquidity risk Management

BAckGRound SuPERVISoRy ouTcoME

In 2018, IOSCO issued a set of best practices and Issue guidance to industry to improve LRM
recommendations on managing the liquidity risks of practices of open-ended CIS.
collective investment schemes (CIS) to protect the
interests of investors, particularly in stressed market
conditions and to mitigate systemic risk.

Following IOSCO’s recommendations, the SC conducted
a thematic review on the liquidity risk management (LRM)
framework of CIS funds.

oBSERVATIonS

• The liquidity risks in the fund management sector remain well-managed, and generally, fund management
companies have taken steps to enhance their liquidity risk management frameworks.

• In the product design phase, most fund management companies take into consideration liquidity risks and
assess the ability to meet the relevant liquidity requirements that will apply to the CIS. However, there is a need
to enhance the policies and procedures to guide managers in their decisions.

• Fund management companies set internal liquidity indicators or thresholds and continuously assess the liquidity
position of the funds against these thresholds. Nevertheless, sophistication of indicators can be enhanced to
strengthen oversight of the liquidity profile of individual funds.

• All systemically important financial institutions (SIFIs) and a number of other fund managers are performing
liquidity stress testing of their funds on an ongoing basis.

• Some fund management companies have put in place contingency plans to ensure that applicable liquidity
management tools can be exercised in a prompt and orderly manner in the event of potential failures to meet
redemptions in time.

44 | PART 2 »» SHAPING MARKET CONDUCT

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