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European MMF Regulation Enters Final Stage

European MMF Regulation Enters Final Stage

by Charlotte Quiniou CFA, Director in Fitch Ratings’ Fund and Asset Manager Rating Group

A significant step towards European money market fund (MMF) regulation has been achieved with the Council of the European Union’s agreement on a revised proposed MMF framework in June 2016. This comes almost three years after the European Commission’s initial proposed text and more than a year after the European Parliament’s revised rules proposal, illustrating the difficulties in reaching a commonly agreed approach for the EUR1.2trn European MMF industry.

Figure 1 - The European MMF Universe

No effective rules before 2019

The draft regulation is now entering its final ‘trilogue’ stage, during which the European Commission, Parliament and Council need to agree on a final text. The first trilogue meeting was held in July and additional meetings will follow after the summer. This will nourish further debate on European MMF regulation and additional changes are likely to emerge. It remains to be seen if the UK’s vote to leave the EU will affect the regulatory debate and prolong the trilogue process. Once agreed, there is a proposed implementation period of 18-24 months. The reform would therefore not be effective before 2019 at the earliest.