On the 1st of April 2019, ALFI responded to the ESMA Consultation Paper on Guidelines on liquidity stress testing in UCITS and AIFs. ESMA has produced a set of fourteen (principles-based) draft guidelines for managers to fulfil when executing liquidity stress tests (LST) on their funds. Broadly, these guidelines set out that LST should: be tailored towards the individual fund, reflect the most applicable risks to a fund, be sufficiently extreme or unfavourable (yet plausible), sufficiently model how a manager is likely to act in times of stressed market conditions, and be embedded into the fund’s risk management framework. One guideline applies to depositaries, outlining how they should fulfil their obligations regarding LST. The guidelines were reinforced via a number of sections providing explanatory considerations for managers, to assist their compliance with the Guidelines.Read ALFI’s response to the 32 questions.