Macroprudential policy is primarily preventive. The toolkit available to macroprudential authorities should include ex ante tools to limit the build-up of risks associated with liquidity and leverage in the investment fund sector, such as minimum mandatory liquidity buffers and redemption notice periods.
The investment fund industry in the EU is furthermore highly concentrated in a few jurisdictions, but – due to the diverse asset holdings and investor locations – the impact of adverse developments in this sector may be felt across the EU. So we should consider elevating the supervision of investment funds and the potential activation of macroprudential tools to the European level.