On Wednesday 5 April, the European Parliament approved, with 514 votes in favour, 109 against and 71 abstentions, the inter-institutional agreement reached in November of last year on the proposed regulation to create a European framework for money market funds (see EUROPE 11669).
The Vice-President in charge of the dossier, Valdis Dombrovskis, pointed out on Tuesday at the start of the debate that the proposal dates back to September 2013, meaning that it has taken more than three years of arduous negotiations to finalise it. Readers may recall that legislators rejected the Commission's base idea of requiring these funds to hold a liquidity buffer of 3% of total CNAV (constant net asset value) assets, providing instead for liquidity fees and redemption gates to be applied during times of stress, along the lines of the American reform. The agreement will create low volatility net asset value (LVNAV) funds (see EUROPE 11305). 'Government CNAVs', which will invest 80% of their assets in European government debt, will follow in 2025, unless a revision scheduled before then allows the Commission to conclude that the LVNAV model could be a viable alternative. The text also lays down a requirement of 10% of assets with a maximum maturity of one day and 30% with maximum maturity of one week for CNAVs and LVNAVs. For VNAVs, this requirement is set at 7.5% of assets with maximum maturity of one day and 15% with maximum maturity of one week.
The Greens/EFA group roundly criticised the fact that the co-legislators have not created an adequate framework for CNAVs, which they consider equivalent to “shadow banks”. Rapporteur Neena Gill (S&D, UK) described it as a 'win-win' agreement for the European monetary fund sector (CNAV and VNAV) and stressed that the objective of preventing future systemic risks had been achieved. (Original version in French by Élodie Lamer)