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Warming Up to Floating NAV

New year promises liquidity challenges given new money fund regulations and bank capital requirements.

By Susan Kelly | Updated on December 08, 2015
In the wake of the financial crisis, companies around the world are holding larger quantities of cash, the bulk of which is parked in bank deposits or money market funds. Managing that short-term liquidity could pose some challenges next year, though, as new regulations will result in changes to money market funds and new capital requirements limit banks’ interest in some corporate deposits.

A J.P. Morgan Asset Management survey conducted in June and July of this year shows that organizations around the world held an average of 47% of their cash in bank deposits, down from 50% in the previous year’s survey.

John Donohue, a principal at J.P. Morgan Asset Management, linked the decline in funds held at banks to banks’ efforts to discourage deposits of non-operating cash in order to meet Basel III capital requirements. “We’re seeing that across the board,” Donohue said. “That money is trying to find a new home.”

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