Brussels, 23/04/2015 (Agence Europe) - The Greens/EFA group at the European Parliament has expressed concerns this week at the possibility that Neena Gill's report on the proposed regulation to institute a European framework for money market funds will be watered down, when it is voted on in plenary next week.
On 26 February of this year, the committee on economic affairs of the European Parliament voted through a position which moved away from the Commission's proposal (see EUROPE 11263). The Commission proposal provided for three new types of constant net asset value money market funds ('CNAV') to be created: 'public debt CNAVs', funds investing the majority (99.5%) of their assets in public debt, retail CNAVs for non-profit organisations, public authorities and foundations and, lastly, at the behest of the ALDE group, 'Low volatility net asset value' money market funds (LVNAV). This last category of funds will include a clause requiring an obligatory conversion ('sunset clause') of these LVNAVs into VNAVs (variable net asset value) after five years (see EUROPE 11263). The problem with CNAVs is that they offer constant remuneration despite market fluctuations.
The EPP member in charge of matters related to this dossier, Ireland's Brian Hayes, was planning to table an amendment which would remove this conversion of the LVNAVs. Further to talks within the EPP group, and in view of the divisions in the group over the issue, Hayes decided against it, with the additional benefit of not reopening the compromise voted on by the ECON committee. However, the ECR group, which would have backed Hayes in this step had he taken it, is reported to be considering calling for a separate vote on the 'sunset clause' (see above). In this event, Petr Jezek (ALDE), the architect of the proposal on LVNAVs, may vote against this 'sunset clause', as will certain members of his group and of the EPP. The Greens/EFA group reports that the S&D has already made this a red line.
The Greens/EFA have tabled amendments to propose that all three categories of CNAV be converted.
For its part, the Council has yet to hold a meeting on this dossier under the Latvian Presidency. The most recent update available on this dossier, dating back to December, explains that the handling of the CNAVs is the “most disputed issue of this file”. At the time, the Italian Presidency had proposed an obligatory conversion of CNAVs into LVNAVs. “Some member states considered the LVNAVs as a permanent regime, while others wanted to have a mandatory transformation of LVNAVs into VNAVs (in other words, variable value) only after a transitional period”, wrote the Presidency, which then attempted a review clause. In a letter dated September 2013 to the then Commissioner Michel Barnier, Pierre Moscovici (then French finance minister) and Wolfgang Schäuble, the German minister, called for a proposal to include a conversion of CNAVs in order to have a healthier and more robust framework for the money market funds. This was also a recommendation of the European Systemic Risk Board. Barnier wanted to avoid “brutal measures” and instead proposed an obligatory liquidity buffer (see EUROPE 10914). (Elodie Lamer)