Art. 3 Contingency policy and liquidity risk mitigation tools | RTS on liquidity management policy | MiCA

Building directly on the liquidity management framework established in Article 2, this article focuses on the proactive, forward-looking side of liquidity risk management for issuers of asset-referenced tokens or e-money tokens.

It requires issuers to develop calibrated early warning signals to detect dangerous deviations in value, maintain and regularly review liquidity risk mitigation tools, and ensure that the outcomes of stress testing feed back into their strategies and contingency plans.

The article also sets out specific documentation requirements to underpin all of this, covering governance responsibilities, emergency strategies, and market monitoring tools.

Important points:

Develop and calibrate early warning signals that detect deviations between the market value of the reserve of assets and the assets referenced by the tokens, under both normal and stress scenarios.
Adjust strategies, internal policies, and liquidity risk limits in response to regular stress testing outcomes, and maintain effective liquidity contingency plans.
Maintain documented policies covering lines of responsibility for the contingency plan, strategies for addressing liquidity shortfalls in emergencies, and tools for timely monitoring of market conditions.

1. As part of the liquidity management policies and procedures, issuers of asset-referenced tokens or e-money tokens shall develop and appropriately calibrate early warning signals. Those signals shall include the following warnings:
  1. for maximum deviations between the market value of the reserve of assets and the market value of the assets referenced by the tokens;
  2. for maximum deviations between the market value of the tokens and the market value of the assets referenced by the tokens.
1. Issuers of asset-referenced tokens or e-money tokens shall have in place and regularly review different liquidity risk mitigation tools, including adequate access to diversified funding sources, to react to any early warning signal, under normal and stress scenarios.
1. Issuers of asset-referenced tokens or e-money tokens shall adjust their strategies, early warning signals, internal policies and limits on liquidity risk, and develop effective liquidity contingency plans to take into account the outcome of regular stress testing.
1. When applying paragraphs 1, 2 and 3, issuers of asset-referenced tokens or e-money tokens shall maintain the following policy documentation:
  1. a description of the lines of responsibilities for designing, approving, monitoring, executing and maintaining up to date the liquidity contingency plan;
  2. a description of the strategies for addressing liquidity shortfalls in emergency situations;
  3. a description of tools, comprising the internal limits set out in the procedures for identifying, measuring and managing liquidity risk referred to in Article 2, to monitor market conditions that allow issuers of asset-referenced tokens or e-money tokens to determine, in a timely manner, whether either escalation or execution of measures, or both, is warranted.