The Italian Presidency of the Council of the EU has published a compromise text of the proposed Regulation on Money Market Funds. The Presidency has proposed a number of amendments to the Commission’s original proposal, the more material of which are set out below:

  • The Presidency has proposed a number of amendments which would, in part, bring the proposed Regulation into line with recent MMF reforms introduced in the United States. 
  • CNAV MMFs would not be required to put a NAV buffer in place. This is a very significant departure from the Commission’s original proposal. 
  • MMFs would not be permitted to receive external support, except in exceptional circumstances justified by systemic implications or adverse market conditions.
  • The compromise text applies only to Retail and Small Professional CNAV MMFs which are defined in the compromise text as MMFs which maintain an unchanging NAV per share, where income is accrued daily or can be paid out to the investor and which are available for subscription only to retail investors, or professional clients (within the meaning of MiFID II) which have requested non-professional treatment.
  • A number of requirements specific to Retail and Small Professional CNAV MMFs have been proposed. For example, if the proportion of weekly maturing assets falls below 30% of nets assets, the Board of the MMF would have to decide whether to apply liquidity fees on redemptions, redemption gates and/or the suspension of redemptions for any period up to 15 days.
  • MMFs would be permitted to invest in the units or shares of MMFs and to enter into repurchase agreements’ subject to certain conditions.

Next Steps

It will be interesting to see the influence (if any) which the compromise text has on the version of the proposed Regulation approved by the ECON Committee.