Talks continue on the proposed regulation aiming to institute a European framework for money market funds. During the third round of inter-institutional negotiations on Tuesday 4 October, the Slovak Presidency of the Council of the EU asked the European Parliament to explain the logic underlying its infamous 'sunset clause'.
The Parliament's negotiating position provides for the creation of three new types of constant net asset value funds, or 'CNAVs': 'public debt CNAVs', which would invest the majority (99.5%) of their assets in government debt, retail CNAVs for charity organisations, public authorities or foundations and, lastly, 'low-volatility net asset value' money market funds (LVNAVs) (EUROPE 11305). For the third category of funds, a clause is included to provide for the obligatory conversion ('sunset clause') after five years of these LVNAVs into VNAVs (variable net asset value funds). The Council also wants to create LVNAVs, but without the sunset clause.
According to a Presidency note prepared to keep the member states abreast of progress in negotiations and of which EUROPE has had sight, the Parliament explains that the sunset clause was necessary to allow the sector to explore the new LVNAV model whilst being able to take account of the systemic risk issue.
For its part, the Commission stressed the need for a stable package which should not require phasing out. The Parliament then asked the Commission for clarifications to move the discussions forwards and to alleviate its final doubts as to the possibility of withdrawing this sunset clause, the note went on to explain.
The MEPs then criticised the Council's approach to the third-party regime, which provides for retail CNAVs to be maintained for legal persons based outside the EU. The Parliament raised a number of issues, particularly asking why investors could not invest in 'public debt CNAVs'. The Commission also had several questions, particularly regarding the need to guarantee stability at global level, rather than just at European level.
The Presidency then said that it would raise these questions with the member states. The meeting of the delegations at expert level will be held on 18 October, ahead of a further 'trilogue' on 25 October. (Original version in French by Élodie Lamer)