UK FCA update on reforms to the Money Market Fund regime

The UK Financial Conduct Authority (FCA) has published a statement with an update on reforming the UK Money Market Fund Regulation (MMFR), following the government's announcement to repeal and replace the existing regime. Following its 2023 consultation and further market engagement, the FCA confirms that requirements will largely move into FCA rules and guidance, while also introducing a new resilience requirement requiring all MMFs to hold sufficient liquidity to withstand market stress.

The FCA will retain current minimum weekly liquid asset (WLA) requirements. However, it expects stable net asset value (NAV) MMFs to hold at least 40% WLA and variable NAV MMFs at least 20% to meet the new resilience requirement. Being lower than these levels temporarily should only occur to meet redemptions or in exceptional circumstances for reasons beyond the manager's control. Daily liquid asset requirements will remain unchanged, and no additional guidance is proposed. The FCA also intends to proceed with other reforms consulted on, including removing links between liquidity thresholds ("delinking") and introducing enhanced "know your customer" requirements to strengthen investor protection.

The government expects legislation to repeal the MMFR to be introduced by the end of the year, with the FCA aiming to align its new rules to this timetable. Interim final guidance on WLA levels will be published, and a policy statement with further detail will follow.

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