Money Market Funds (MMFs) are a type of collective fund that invest in short-term debt and provide financing for financial institutions, corporations and governments. During the financial crisis their liquidity and stability were challenged which prompted discussion on how to make them more shock-resistant.
In 2013 the Commission proposed a regulation on MMFs aiming to improve their ability to weather stressed market conditions, mainly through establishing a capital buffer, introducing conditions on portfolio structure, addressing over-reliance on external credit rating agencies and improving their internal risk management, transparency and reporting. In April 2015 the European Parliament adopted amendments in which it proposed the creation of new kinds of MMFs and chose not to retain the capital buffer. The Council reached a general approach in June 2016 and three trilogue meetings have taken place since then.
The reaction of stakeholders was mixed: many welcomed the intention to establish a harmonized and transparent MMFs’ framework at EU level but there have also been considerable concerns raised regarding the impacts, including of the capital buffer.