MMF vote delay could see reforms hit the rocks
0Proposed regulations which could hit local authority investments in money market funds (MMFs) could be scuppered by a decision to delay a vote on the matter during a stormy session of a European Parliament committee.
Last month, representatives of the MMF investment industry, along with investors from the private and public sector visited Brussels to campaign against the changes.
And last week, the European Parliament’s economic and monetary affairs committee (ECON) voted 23 to 15 to delay a vote on the issue, after some members complained that the issue had not been discussed properly.
A statement released by ratings agency Fitch following the vote said: “The ECON committee has a rescheduled vote to finalise draft rules on 10 March. With European Parliamentary elections due in May, it is by no means certain that the previous timetable, which envisaged a full European Parliament vote in April, can be met.”
Michael Quicke, chief executive of CCLA, who was part of the lobbying efforts last month, told Room151 this week: “During our discussions in Brussels, our principal interest was to make sure that the committee was fully aware of the landmine they were putting their foot on.
“What has happened is people are coming round to the fact that there is a real issue here. I think we played a small part in that.”
He said that if the committee continued to find it difficult to reach a compromise on the proposals before European elections in May, the issue would have to be reconsidered by the new Parliament, with the potential that it goes back to the drawing board.
CCLA, along with organisations from other European countries, objects to two parts of the EU’s MMF reform proposals.
Firstly, new rules would require all constant net asset value MMFs to retain a 3 per cent buffer, which objectors believe would mean fund managers would withdraw from the instrument.
Additionally, the proposals would ban retail investors from investing in constant net asset value MMFs – under a separate EU regulation, councils will be considered retail investors from 2015.
Fitch has also pointed to a proposal which it says would prevent MMFs investing in ABCP backed by assets other than trade receivables.
It said: “In practice, this would prevent MMFs investing in almost all ABCP conduits.”
MMFs are considered a safer investment option than a bank deposit because the funds investments are diversified.
During the committee session, Belgian MEP Philippe Lamberts, member of the green Ecolo party, accused those trying to block a vote of “delaying tactics”.
He said: “I am not a finance person but i know enough to tell truth from bullshit. As a legislator, surrendering to the bullying of the industry, I won’t take it.”
But fellow committee member Gay Mitchell, of the Irish Fine Gael Party, pointed out that concerns were not only being raised by the finance industry, but also by public bodies including local authorities.
He said: “We have been asked to vote on something that we don’t know the implications of. I am only asking for time so people have time to understand it.”
