BNY Mellon and Investor Analytics have today launched their money market stress testing service in the Europe, Middle East and Africa region.
The new service models the impact of interest rate shocks, credit risk shocks and liquidity risk shocks or any combination of these on the value of funds. Information is presented in reports that identify the conditions that could lead to a depressed net asset value (NAV) below an established threshold, an event commonly referred to as breaking the buck.
As worries over the health of Eurozone countries, and indeed the United States, have spiraled in recent months, regulators throughout the world are increasingly demanding that money market funds undergo stress tests, Frank Froud, head of Europe, Middle East & Africa for Asset Servicing at BNY Mellon, says. However, more than simply meeting the regulatory requirement, stress testing has become an industry best practice, allowing fund directors and investors to easily understand the market conditions that can jeopardize their funds.
Damian Handzy, CEO of Investor Analytics, adds: The need for a solid risk framework and understanding of money market funds has only been reinforced by recent market turmoil. These stress tests allow clients of BNY Mellon to be alert to the dynamics of the markets and how this affects portfolios.
(CM)