EU plans crackdown on money funds to enforce liquidity levels

Tim Wallace
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MONEY market funds (MMFs) will have to publish more data on their investments under new EU rules published yesterday.

The proposals will also restrict the type and size of investments the funds can make.

MMFs aim to keep clients’ money safe and liquid by investing in ultra-safe securities in large, liquid markets, at the cost of low returns.

The European Commission believes the funds act like banks, behaving as deposit-taking institutions, and so wants to regulate them more.

“MMFs would be required to have at least 10 per cent of their portfolio in assets that mature within a day and another 20 per cent that mature within a week,” the EC proposed.

“This requirement is there to allow the MMFs to repay investors who want to withdraw funds at short notice.”

They will also be restricted in how much can be saved with any one securities issuer.