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The finalisation of the EU Money Market Funds Regulation (MMFR) is progressing: following the agreement reached between the EU institutions end of November, the Council and the Parliament ECON Committee have approved the agreement internally, and the final publication in the EU Official Journal is now expected in Q2 this year. This would mean that the provision of MMFR would apply to new MMFs as of Q2 2018 and to existing ones as of Q4 2018. 

As a reminder, the MMFR will have implications for corporate end-users investing in MMFs, but many of the initial concerns voices by the EACT and other MMF end-users have been taken into account in the final compromise as:

  • there is no ban on external credit ratings for MMFs and funds will continue be able to sollicitate external ratings

  • there will be no capital buffers required for funds, which would have undermined the continued availability of certain types of funds used by corporates

Other changes relevant to corporate treasures include:

  • the MMFR retains three types of funds: Variable Net Asset Value (VNAV) funds, Low Volatility Net Asset Value (LVNAV) funds and Public Debt Constant Net Asset Value (CNAV) funds

  • Both Public Debt CNAV funds and LVNAV funds can under certain conditions impose liquidity fees and redemption gates to their investors. Application of gates and fees becomes mandatory when weekly liquid assets fall below 10%, prior to that the fund has discretion

  • LVNAV funds will have to convert into floating NAV when the mark-to-market value per unit deviates from the constant asset price by more than 20 basis points

  • The Public Debt CNAV funds will be allowed to hold non-EU public debt also, but in five years the Commission will review whether restrictions to non-EU public debt should be imposed

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