SBAI Responds to ESMA CP Leverage Risks

In our response we highlight:

• Current leverage measures are not meaningful for making well informed judgements on the contribution of “leverage” to systemic risk
• That the framework for assessment of leverage-related systemic risk should be developed first to understand how the use of leverage contributes to the build-up of systemic risk
• A materiality assessment of AIFs in the context of the size of the European asset management sector overall should be considered to assess the relevance of the framework
• A clearer distinction is needed between rare market events and systemic risk events

ESMA consults on guidance to address leverage risk in the AIF sector (09/2020)