On June 4,  the European Central Bank (ECB) published an opinion on the European Commission’s proposed regulation on Money Market Funds (MMF).  The MMF regulation, which is aimed at enhancing the liquidity and stability of MMF, is part of a wider effort to develop a regulatory framework for shadow banking entities, over which concerns have been growing in relation to financial stability.

In the opinion, the ECB makes supporting observations towards the proposed regulation in the following areas:

• the interconnection of the regulation and the legal frameworks for undertakings for collective investment in transferable securities (UCITS) and alternative investment fund managers (AIFMs);
• financial stability;
• the constant net asset value of MMFs;
• the provision of external support;
• risk management of MMFs;
• the role of MMFs in intermediation;
• internal rating systems; and
• reporting requirements for MMFs.

In addition to those observations, the ECB also suggests a number of technical amendments to the proposed regulation. Opinion.