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EU money market regs welcomed
08 December 2016
EFAMA broadly satisfied with the Money Market Fund Regulation signed-off yesterday but remains concerned about KYC and other aspects
money market fund
The EU Money Market Fund Regulation was been
signed off yesterday in a form that is much more by the
industry than the original proposal.
The Council of Ministers yesterday signed off the
regulation in a meeting of EU Ambassadors (COREPER) and this
morning it was confirmed by the European
Parliament’s ECON Committee. The orginal proposal
from the European Commission was put forwad in 2013.
European asset management trade body EFAMA
welcomed the outcome as more workable for its members managing
money market fund (MMFs), of both variable and constant net
asset value funds (VNAV and CNAV respectively).
Peter De Proft, director general of EFAMA, said:
"From the outset, we have indicated that a proportionate and
balanced Regulation which ensures the viability of both CNAV
and VNAV MMFs can support alternative sources of financing to
the real economy, a key focus of the European
Commission’s flagship initiative on a Capital
"In terms of CNAV MMFs, we welcome the creation of
the LVNAV product which has the possibility of offering
investors a real alternative to European CNAV Prime
"Equally important is the retention of a workable
government CNAV regime in different currencies. For the VNAV
industry, a number of serious operational challenges have been
minimised. However, the MMFR is by no means a panacea for
either the industry or investors in MMFs."
While the final regulations were welcomed concerns
remain around liquidity calculations.
EFAMA describes the thresholds set in the final political
agreement as "arbitrary" and the lack of a principles-based
approach to calculations mean they may not be workable in all
EFAMA also criticised the barring of MMFs from
being allowed to operate as fund-of-funds, which is used by
VNAV managers to achieve diversification. In addition, it
questioned how the exemption from the
10% diversification limit of assets in deposits would work as
well as whether it would be practical for smaller managers to
apply know-your-customer requirements.
De Proft added: "One cannot ignore the number of
question marks on the potential consequences of different parts
of the agreement. It remains to be seen whether smaller players
will be able to continue operating, given the more elaborate
compliance and disclosure requirements, combined with low