At a recent meeting of the European Parliament’s ECON Committee, Neena Gill, the new Rapporteur for the draft MMF Regulation, presented her initial views on the draft Regulation and an indicative timetable for next steps in the European Parliament.
Alternatives to the 3% Capital BufferIn her opening remarks, Ms Gill explained to the ECON Committee that is was not her intention to dismantle the EU MMF industry, but rather strike a balanced approach to MMF reform in Europe. She acknowledged however that in that context the most controversial proposal contained in the draft Regulation was the 3% capital buffer requirement.
In her view, there were four possible ways to tackle this aspect of the draft Regulation, namely:
- Implement the draft Regulation as is, together with the controversial 3% capital buffer
- Consider redemption fees and gates as an alternative to the 3% capital buffer
- Introduce a variation of the capital buffer requirement, from which certain types of MMF might be excluded
- Focus on what she called the Italian Presidency option of low volatility VNAVs.
Ms Gill also announced that she was proposing holding a roundtable event at which she could hear views from all interested parties, on the best options for reform of the EU MMF industry. In particular, she acknowledged that while there had been much criticism of some of the proposals contained in the draft Regulation, very few alternative solutions had been proposed. The SEC could also be invited to participate in this process, either before or at the round table event which is currently scheduled to be held at the beginning of November 2014.
Regarding next steps, Ms Gill explained to the ECON Committee meeting that she envisages the following:
- Her draft report on the draft Regulation will be presented to the ECON Committee around 1-2 December 2014
- Any proposed amendments to the draft report should be submitted and finalised around 12 December 2014
- The draft report, and any proposed amendments to the draft Regulation, are scheduled for discussion at the 21 January 2015 ECON Committee meeting
- The European Parliament could possibly vote on the proposal at its March 2015 plenary session.