MMF reform dropped from ECON agenda

The European Parliament has dropped proposals for the reform of money market firms which had raised fears for council investment strategies.
A meeting of the parliament’s economic and monetary affairs committee (ECON) had been due to vote on the reforms this week, but the matter was dropped from the agenda.
The decision to abandon a vote follows a campaign by investment firms, local authorities and charities across Europe, concerned that the proposals would lead to the destruction of constant net asset value MMFs (CNAVs).
The issue of MMF reform could return to the committee following the election of a new parliament in May, but the delay will mean that members will likely be able to take into consideration the verdict of US authorities, which is likely to arrive before June.
Committee member Gay Mitchell, of the Irish Fine Gael Party, told Room151: “There has been very little effort to meet genuine concerns about CNAVs.
“They would not continue if MMF reform in its current format passed and the majority of MEPs feel this is too big a decision to rush and that CNAVs should continue, perhaps with some ” just in case” safeguards.
“Rushed legislation would be bad legislation and the attempt had been to have it on plenary agenda for April. The majority feel we should leave it to the new parliament to give it timely consideration.”
European elections are taking place in May, which are likely to change the membership of the ECON committee.
If the committee decides to revive the issue, it is likely that it will be able to consider the conclusions of the US Securities and Exchange Commission, which is currently also considering MMF reform.
The SEC is looking at two different options. The first would see MMFs divided into retail and institutional funds. Instituitional funds would have variable net asset values, while retail funds would be able to retain a fixed value.
The second proposal would see the adoption of “gates” which would limit withdrawals once weekly liquid assets fall to less than 15 per cent of total investments for a period of time.