Irish Funds welcome final agreement on Money Market Funds12 December 2016
Irish Funds, the representative body for the international cross-border investment funds industry in Ireland, has welcomed the Economic and Monetary Affairs Committee’s (ECON) approval of the final compromise text on the EU’s Money Market Fund Regulation (MMFR). The Committee of Permanent Representatives of Member States to the EU (COREPER) also endorsed the text yesterday, signalling wider choice for investors.
As of the end of September 2016, assets under management in Irish MMFs totalled €444 billion. Significantly, over the course of the first nine months of the year, net sales generated by Irish MMFs amounted to €13 billion. Provision for the Public Debt CNAV MMF and LVNAV MMF presents a range of MMF product choice which Ireland, already the premier domicile for CNAV MMFs, can offer, to further expand this sector.
The agreement provides for a greater variety of investment vehicles, such as the Public Debt CNAV MMF and a Low Volatility NAV (LVNAV) MMF, in addition to a VNAV MMF.
MMFR contains new requirements for liquidity and diversification, with stricter thresholds applicable to CNAV and LVNAV and new conditions applicable in relation to the use of government securities as liquid assets. The new comprehensive regime for MMFs also sets out detailed requirements covering eligible assets, securitisations and ABCPs, credit assessment, risk management and stress testing, disclosures and regulatory reporting.
It is expected that the text will be formally approved by the Council of the EU and in plenary at the European Parliament during the first half of 2017. According to this timeframe, MMFR is likely to come into force in Q2 2018. Existing MMFs are provided with an 18-month transitional period.
Irish Funds has commended the work undertaken and the result achieved by EU policymakers. Pat Lardner, Chief Executive at Irish Funds, commented:
“The preservation of permanent stable NAV MMF product options in the final text is welcome. The move away from earlier proposals to impose capital buffers on CNAV MMFs, or to ban CNAV MMFs entirely, demonstrates a significant and welcome evolution in the thinking behind policy making and a recognition of the valuable role that CNAV MMFs play for investors and the wider economy.”
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