ESMA launches MMF consultation to review 2020 market stress
26 March 2021 France
Image: veneratio/adove.stock.com
The European 麻豆传媒 and Markets Authority (ESMA) has launched a consultation on potential reforms of the Money Market Funds Regulation (MMFR) to mitigate against a repeat of the COVID-19 fuelled stresses experienced in March 2020.
The amendments being considered by the securities market watchdog focus on four areas, including reforms targeting the liability side of MMFs, such as decoupling regulatory thresholds from suspensions/gates to limit liquidity stress, and requiring MMF managers to use liquidity management tools such as swing pricing.
Second, there may be amendments to the asset side of MMFs to review requirements around liquidity buffers and their use.
Third, ESMA is considering changes to both the liability and asset side of MMFs by reviewing the status of certain types of MMFs, such as stable net asset value MMFs and
low volatility net asset value.
Fourth, the rules around the role of sponsor support could be modified.
In addition, ESMA is also gathering feedback from stakeholders on other potential changes, particularly linked to ratings, disclosures and stress testing.
ESMA will consider the feedback it received to this consultation in Q2 2021 and expects to publish its opinion on the review of the MMF Regulation in the second half of 2021.
Of the proposals, Steven Maijoor, ESMA鈥檚 outgoing chair, says: 鈥淭he COVID-19 crisis has been very challenging for some MMFs, with large redemptions from investors and a severe deterioration in the liquidity of money market instruments.
鈥淪ome of the regulatory reforms implemented after the global financial crisis did not work as intended.
鈥淓SMA is seeking input from stakeholders on potential reforms of the EU MMF regulatory framework, in light of the lessons learnt from the difficulties faced by MMFs last March, with the aim of providing feedback to the commission ahead of the scheduled legislative review.鈥�
Article 46 of MMFR requires the commission to review the regulation from a prudential and economic point of view by 21 July 2022.
The amendments being considered by the securities market watchdog focus on four areas, including reforms targeting the liability side of MMFs, such as decoupling regulatory thresholds from suspensions/gates to limit liquidity stress, and requiring MMF managers to use liquidity management tools such as swing pricing.
Second, there may be amendments to the asset side of MMFs to review requirements around liquidity buffers and their use.
Third, ESMA is considering changes to both the liability and asset side of MMFs by reviewing the status of certain types of MMFs, such as stable net asset value MMFs and
low volatility net asset value.
Fourth, the rules around the role of sponsor support could be modified.
In addition, ESMA is also gathering feedback from stakeholders on other potential changes, particularly linked to ratings, disclosures and stress testing.
ESMA will consider the feedback it received to this consultation in Q2 2021 and expects to publish its opinion on the review of the MMF Regulation in the second half of 2021.
Of the proposals, Steven Maijoor, ESMA鈥檚 outgoing chair, says: 鈥淭he COVID-19 crisis has been very challenging for some MMFs, with large redemptions from investors and a severe deterioration in the liquidity of money market instruments.
鈥淪ome of the regulatory reforms implemented after the global financial crisis did not work as intended.
鈥淓SMA is seeking input from stakeholders on potential reforms of the EU MMF regulatory framework, in light of the lessons learnt from the difficulties faced by MMFs last March, with the aim of providing feedback to the commission ahead of the scheduled legislative review.鈥�
Article 46 of MMFR requires the commission to review the regulation from a prudential and economic point of view by 21 July 2022.
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