Money Market Funds: Measures to improve stability and liquidity

11-02-2016

Money Market Funds (MMFs) are a type of collective fund that invest in short-term debt and provide financing for financial institutions, corporations and governments. During the financial crisis their liquidity and stability were challenged which prompted discussion on how to make them more shock-resistant. In 2013 the Commission proposed a regulation on MMFs aiming to improve their ability to weather stressed market conditions, mainly through establishing a capital buffer, introducing conditions on portfolio structure, addressing over-reliance on external credit rating agencies and improving their internal risk management, transparency and reporting. In April 2015 the European Parliament adopted amendments in which it proposed the creation of new kinds of MMFs and chose not to retain the capital buffer. The Council has yet to reach a general approach. The reaction of stakeholders was mixed: many welcomed the intention to establish a harmonised and transparent MMF framework at EU level but there have also been considerable concerns raised regarding the impacts, including of the capital buffer. A more recent edition of this document is available. Find it by searching by the document title at this address: http://www.europarl.europa.eu/thinktank/en/home.html"

Money Market Funds (MMFs) are a type of collective fund that invest in short-term debt and provide financing for financial institutions, corporations and governments. During the financial crisis their liquidity and stability were challenged which prompted discussion on how to make them more shock-resistant. In 2013 the Commission proposed a regulation on MMFs aiming to improve their ability to weather stressed market conditions, mainly through establishing a capital buffer, introducing conditions on portfolio structure, addressing over-reliance on external credit rating agencies and improving their internal risk management, transparency and reporting. In April 2015 the European Parliament adopted amendments in which it proposed the creation of new kinds of MMFs and chose not to retain the capital buffer. The Council has yet to reach a general approach. The reaction of stakeholders was mixed: many welcomed the intention to establish a harmonised and transparent MMF framework at EU level but there have also been considerable concerns raised regarding the impacts, including of the capital buffer. A more recent edition of this document is available. Find it by searching by the document title at this address: http://www.europarl.europa.eu/thinktank/en/home.html"