The EU proposal to regulate money market funds (MMFs) was postponed to the next European Parliament. The vote was scheduled for last week's Economic and Monetary Affairs Committee meeting in Strasboug but it was abandoned following opposition from the right wing.
The controversial regulation, proposed last year by the European Commission, was said to potentially kill off the industry, as the low-margin nature of money market funds would render the creation of a buffer uneconomic. The idea is to make money market funds more liquid and stable by imposing strict liquidity and diversification requirements, as well as a capital buffer for CNAVs (constant net asset value funds, a particular type of money market funds) since these funds represent an important source of short-term financing for financial institutions, corporate bodies and governments, considering that almost 40% of short-term debt issued by the banking sector is held by MMFs.
Said El Khadraoui, S&D MEP and the European Parliament's negotiator on the topic, expressed his concerns:
"The move to block regulation in the money market funds sector is simply unwise and unacceptable. I am very surprised to see how elected MEPs act like puppets for the financial markets, rather than protecting the citizens who elected them to build a safer European Union.
Criticizing the conservative and liberal parties, he added that "a very vocal minority of members of [both parties], clearly serving the interests of the financial industry, have managed to impose their will – for the third time – and to block any proper reform of the money market funds sector, thereby leaving it unregulated and keeping status quo.
"After the financial crisis, the investment runs we have seen on these funds – both in the EU and in the USA – and all the appeals from international and European organizations to urgently regulate this sector, this move is very worrying and a major disappointment."
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