EC report and new guidance on MMFs

The European Commission (EC) has published a report assessing the adequacy of Regulation (EU) 2017/1131 on money market funds (MMFs), alongside new guidance in the form of FAQs. The EC's first 2023 MMF report concluded that the framework, in force since 2018, operates effectively in reducing liquidity risks, while identifying certain aspects relating to liquidity risk requiring further assessment. Building on this, the latest report finds that MMFs generally adopt a cautious approach, maintaining liquidity buffers above the regulatory minimum and demonstrating an ability to replenish them, including during periods of market stress. The report also includes analysis relevant to market resilience levels in the MMF sector, intended to serve as benchmarks to support supervisors in identifying situations that may warrant closer monitoring. The accompanying FAQs clarify expectations regarding minimum liquidity levels and the use of liquidity buffers, particularly in periods of market stress and heightened redemption requests.

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