Art. 5 Process and procedures to test scenarios of liquidity stress | RTS on liquidity management policy | MiCA

This article builds directly on the liquidity management framework established in earlier articles, specifically adding detailed requirements around stress testing.

It requires issuers of asset-referenced tokens and e-money tokens to embed liquidity stress testing processes and procedures within their liquidity management policies, covering the full lifecycle of a stress test from design through to outcome and any remedial action taken.

A notable requirement is the inclusion of a reverse stress test, which works backwards to identify the point at which the reserve of assets would break down under pressure.

Important points:

Embed liquidity stress testing processes and procedures, including the risks covered, parameters used, historical data and assumptions, and the outcomes and remedies, within your liquidity management policy.
The stress testing must include a reverse stress test element to assess the resilience limits of each reserve of assets.
These obligations apply to issuers of both asset-referenced tokens and e-money tokens.

1. Issuers of asset-referenced tokens or e-money tokens shall include in their liquidity management policy the process and procedures to test scenarios of liquidity stress and the following information concerning each stress test:
  1. risks covered in the liquidity stress testing;
  2. parameters considered, their calibration under stress, and the stress scenarios and time horizons used in the liquidity stress testing;
  3. historical data and assumptions, including any expert judgments, considered by the issuer in the calibration of the parameters referred to in point (b);
  4. the outcome of the liquidity stress testing and any remedies taken.
1. The liquidity stress testing shall include a reverse stress test element to assess the limit of resilience of the liquidity profile of each reserve of assets.