ESMA proposes reforms to improve resilience of Money Market Funds

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, is issuing an Opinion containing proposed reforms to the regulatory framework for EU Money Market Funds (MMFs) under the Money Market Funds Regulation (MMFR). The proposals will improve the resilience of MMFs by addressing in particular liquidity issues and the threshold effects for constant net asset value (CNAV) MMFs.

These proposed reforms result from the lessons learnt from the significant liquidity difficulties faced by MMFs during the initial outbreak of the COVID-19 pandemic in March 2020.  At the time investor redemption rates rose on the liability side with a corresponding deterioration in the...