In an effort to guard against systemic risk, global securities regulators unveiled a framework for monitoring the buildup of investment fund leverage.
The framework, issued by the Madrid-based International Organization of Securities Commissions (IOSCO) on Friday, sets out recommendations that aim to ensure accurate, consistent monitoring for leverage-related risks in specific funds or groups of funds.
“IOSCO has developed the first comprehensive approach to monitoring leverage across all types of investment funds globally” said Ashley Alder, chair of IOSCO’s board.
“It provides a framework to help regulators assess leverage-related risks that can undermine the efficient functioning of markets,” he added.
The group’s recommendations aim to find a balance between leverage measures that are both precise and simple, so that regulators can apply them to a wide range of funds.
IOSCO stated that it will start publishing an annual report detailing leverage trends in the asset management industry. The first report is scheduled to be published in 2021.