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EU Looking to Impose Capital Buffer on Money-Market Funds

Plan would allow money funds to retain a stable NAV, but would impose new capital requirements on those that do.

By Jim Brunsden, Bloomberg | Updated on September 06, 2013

Banks and asset managers running money-market funds may be forced by the European Union to raise capital buffers and hoard easy-to-sell assets as part of a regulatory push to tame the $4.7 trillion global industry.

Michel Barnier, the EU’s financial services chief, said such buffers would have dealt with most difficulties suffered by fixed share-price funds in the wake of the 2008 financial crisis, as he rejected calls for an outright ban from German Finance Minister Wolfgang Schaeuble, his French counterpart Pierre Moscovici and a group of EU regulators.

090613-Bloomberg-PQ1Money market funds “are not always stable, and in a period of tension they can threaten the financial system, including the banks,” Barnier told reporters in Brussels. He said “a formal and brutal ban” of fixed share-price funds sought by some regulators was unnecessary and would hamper investors.

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