MMFs

ECON Publishes Draft Report on MMF Regulation

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On November 17, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on the proposed Regulation on Money Market Funds (the MMF Regulation).

Money market funds are a type of investment fund that invests in short-term debt such as money market instruments issued by banks, governments and companies (MMFs).  If adopted, the MMF Regulation will introduce a general framework of requirements to enhance the liquidity and stability of MMF funds.

The draft report sets out suggested amendments to the European Commission’s original proposal and an explanatory statement. The statement comments that:

  • there is still significant scope for improvement relating to liquidity and maturity transformation and in making MMFs more stable;
  • a new category of EU government constant net assets value money market fund (CNAV MMF) should be established, which would invest a majority of assets into EU government debt; and
  • the net asset value of CNAVs should be subject to daily disclosure requirements, stress tests should take place on a quarterly basis and there should be stronger investor warnings.

The Parliament is scheduled to consider the MMF Regulation at its plenary session on March 25, 2015. Draft report.

Commission Publishes Proposals for a Regulation on MMFs

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On September 4, a proposed Regulation on money market funds (MMFs) was published by the Commission, accompanied by a press release, impact assessment, FAQs and various other documents.  These can be found, along with further information, on a specialized webpage set up by the Commission.  The proposed Regulation’s purpose is to help MMFs, through enhancing their liquidity profile and stability, better withstand redemption pressure in stressed market conditions.

Among other things, the Regulation contains provisions on:

  • Prescribed levels of daily and weekly liquidity;
  • Clear labeling;
  • A capital bidder of 3% for constant net asset value funds;
  • Customer profiling policies; and
  • Requirements for the MMF manager regarding internal credit risk assessment.

The proposed Regulation and impact assessment are currently draft versions; the final text is due for publication soon.  The proposed Regulation will now go to the European Parliament and Council of the EU for consideration, and the Commission has stated that it expects the Regulation to be agreed upon in 2014.