Investment funds sector

The CNB has been conducting a regular stress test of the investment funds sector since 2019. The test results are published once a year in the Financial Stability Report. The aim of the test is to assess the resilience of individual investment funds in a hypothetical adverse economic scenario. The stress testing of the investment funds sector focuses mainly on balance-sheet and market liquidity risk. In the test, this is linked to potential fire sales of investment assets by the funds to satisfy redeeming investors reacting to the adverse situation and to the knock-on effect of the sales on the market prices of the investment assets concerned. From the CNB’s perspective, crucial to the test is an analysis of the fire sales of investments assets whose holdings across sectors in the Czech financial system constitute the main indirect linkage for the spread of an adverse shock. Supervisory data for individual investment funds are the primary data source for conducting stress tests of the investment funds sector. Since the year 2022, the test has been extended to include pension management company participation funds, whose business model and regulatory treatment is similar to that of investment funds.

Current stress testing methodology

Stress test results