| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2013) 615 final (4.9.13) |
| Publication Date | 04/09/2013 |
| Content Type | Policy-making |
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Money Market Funds (MMFs) are an important source of short-term financing for financial institutions, corporates and governments. In Europe, around 22% of short-term debt securities issued either by governments or by the corporate sector are held by MMFs. MMFs hold 38% of short-term debt issued by the banking sector. With assets under management of around 1000 billion Euros, MMFs represent a category of funds that is distinct from all other mutual funds. The majority of MMFs, around 80% of the assets and 60% of the funds, operate under the rules of the Directive 2009/65/EC on Undertakings for Collective Investment in Transferable Securities (UCITS). The rest of MMFs should been operating, since July 2013, under the rules of the Alternative Investment Fund Manager (AIFM) Directive 2011/61/EU. On the demand side, MMFs offer a short-term cash management tool that provides a high degree of liquidity, diversification, stability of value combined with a market-based yield. MMFs are mainly used by corporations seeking to invest their excess cash for a short time frame, for example until a major expenditure, such as the payroll, is due. MMFs, therefore, represent a crucial link bringing together demand and offer for short-term money. Because of the systemic interconnectedness of MMFs with the banking sector on the one hand and with corporate and government finance, on the other hand, the operation of MMFs has been at the core of the international work on shadow banking. The European Parliament adopted a resolution on shadow banking in November 2012 where it invites the Commission to submit a proposal with particular focus on the MMF issue. The proposed regulation will rely on the existing authorisation procedures for UCITS which are harmonised by the UCITS Directive. It will introduce a harmonised authorisation procedure for AIF MMFs, as the AIFM Directive leaves authorisation of AIFs at the discretion of Member States. The harmonised procedure for AIF MMFs will mirror the harmonised authorisation procedure foreseen for UCITS. Managers will continue to be regulated by either the UCITS or AIFM Directive but managers and funds falling under the scope of this Regulation will have to comply with this additional layer of specific MMF product rules. These uniform rules intend to safeguard the integrity of the internal market and increase its robustness to minimise the effects of a new crisis. Investors will gain awareness over the risks attached to these regulated products and certainty about the homogenous investment proposition associated with money market funds in the Union. Managers will benefit from harmonized product rules all over Europe. Issuers of money market instruments will profit from a more stable environment that will preserve the role of MMFs as a financing tool. |
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| Source Link | http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2013:615:FIN |
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| Subject Categories | Business and Industry |
| Countries / Regions | Europe |
