Ireland’s Money Market Funds industry will remain intact following new EU reforms – Hayes
Brian Hayes MEP for Dublin and lead negotiator for the EPP on the EU’s Money Market Funds (MMF) Regulation today (Thursday) welcomed the ECON Committee vote of approval on the final text of the new Regulation. MMFs are highly liquid short-term cash management instruments used mainly by corporations and governments seeking to diversify their portfolios. Ireland is the leading domicile of Money Market Funds in the EU.
“The Money Market Funds Regulation has been one of the most contentious pieces of EU legislation in recent years. This outcome has taken over 3 years to achieve but the final agreement is a hugely important milestone for Irish funds.
“What is most important in the final agreement is that both sides of the Money Market Funds industry – Constant Net Asset Value funds (CNAV) and Variable Net Asset Value Funds (VNAV) – will continue into the future, albeit under stricter conditions.
“The Commission’s original proposals effectively put a ban on CNAV Money Market Funds by imposing a 3% capital buffer requirement, an impossibility for these funds to achieve while maintaining normal operations. This would have had a disastrous effect on the Irish funds industry, which has over €400 billion worth of CNAV domiciled funds.
“The final agreement has replaced current CNAV funds with two new types of funds – Public debt CNAVs and Low Volatility NAV funds. Additional safeguards such as strict daily and weekly liquidity requirements, diversification limits and escalation procedures will now be applied to these funds to ensure that they can cope with market shocks and potential run risk. There will also be increased transparency requirements where fund managers must give investors weekly updates on the portfolio of their fund.
“The right balance has been achieved between addressing the systemic risk features of Money Market Funds but also ensuring that the essential features of CNAV funds can continue and be used by corporations and governments who depend on such funds to sustain their short-term financing needs.
“In Ireland, we have a thriving funds industry but unfortunately this has often been under threat by the EU’s heavy-handed fund regulation agenda. We cannot let large Member States set the agenda on key financial services files that exclusively suit their own interests.
“The outcome of the Money Market Funds Regulation shows that small Member States can really have a big influence on EU legislation. Due to significant Irish efforts in the European Council and the Parliament, we have managed to defend Irish interests successfully. But as we enter a post-Brexit environment these key financial services issues will become harder for Ireland to defend.”