On 7 March 2022, the Central Bank of Ireland ("Central Bank") issued a letter regarding effective management of risks due to the ongoing Russian invasion into Ukraine.

The letter touches on three key themes – the requirement to monitor, manage and comply with the sanctions, as well as addressing valuation considerations and reliance on liquidity management tools.

The letter reminds funds service providers ("FSPs"), including management companies, administrators and depositaries, of the obligation to comply at all times with the new restrictive measures / sanctions and the associated European Union / United Nations Guidance published on the Central Bank's website.  Any proposed transactions targeted by the sanctions should be monitored and managed appropriately. Where necessary, accounts should be frozen and / or the transaction(s) stopped and immediately reported to the Central Bank.

Against the backdrop of current market conditions, fund management companies must ensure that valuation of assets is fair and proper and in accordance with the fund valuation policies and rules. Liquidity management tools should be used to ensure a fund's liquidity remains in line with its redemption policy and expected investor demands. Fund management companies are expected to be open and forthcoming to the Central Bank with issues materially affecting funds and should inform the Central Bank of any suspension of trading or the need to use alternative liquidity management tools.

The fiduciary and oversight obligations of depositaries in relation to the funds to which they are appointed are also regarded as being of paramount importance. Any breaches relating to composition of a fund's portfolio due to the current market volatility should be reported to the Central Bank in the normal course and may be subject to supervisory engagement.

In addition to required regulatory reporting during this period, the Central Bank expects FSPs to engage with it in a timely manner where matters of concern arise or potential risks look likely to occur.

The letter should be brought to the attention of all board members of FSPs, funds, relevant pre-approved control function holders and other relevant responsible people.