PLACE FINANCIÈRE & MARCHÉS — Fonds

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“Money Market Fund Regulation: let’s turn lights on”


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MMFR deserves more attention. Asset managers and service providers, are you really sure that you are not impacted?

The Money Market Fund Regulation, also known as MMFR, is applicable for new funds since July and for existing ones from the 21st of January 2019.

The global market is currently over 1 trillion EUR but, as of today, the general feeling at Luxembourg level is that this regulation did not receive yet the right attention. Indeed, asset managers and service providers, especially in the last few years, faced a huge volume of regulatory impacts and sometimes it is difficult being on top of all of them.

The first step is the identification of in-scope funds.

Alessandro MangioneAlessandro Mangione, Product manager (BNP Paribas Securities Services)

The first step is the identification of in-scope funds: AIFs or Ucits that invest in money market instruments and offer return in line with money market rates or preserve the value of investment. 

Asset managers are required to perform a self-assessment on the existing range, comparing each sub-fund, even where currently not considered as money market, with the new rules and to come out with a final list. 

In case of doubt, the CSSF is the only entity that could help in taking a definitive result.

Money market funds may be structured as Public Debt Constant NAV (“CNAV”), Low Volatility NAV (“LVNAV”) or as Variable (“VNAV”) MMFs and it is remarkable that Luxembourg is one of the few jurisdictions that offer all three types.

As concerns the actions to be taken, there is a clear distinction between the responsibilities of asset managers and of services providers’.

BNP Paribas Securities Services will be fully compliant with the new regulation.

Alessandro MangioneAlessandro Mangione, Product manager (BNP Paribas Securities Services)

Concerning asset managers’ duties, the regulation lays down, among others, rules for money market funds to ensure stability and diversification. It also introduces rules on “know your customer” policy; it prohibits external support and imposes new frequency for stress tests. New requirements are requested in terms of internal credit quality assessment procedures and all external documents have to be reviewed to ensure they are in line with the regulation.

As a depositary and provider of TA and fund administration services, BNP Paribas Securities Services will be fully compliant with the new regulation, with a global offer to stand on three axes: people, clients and products. 

As regards people, we put in place an internal training programme on the topic. With reference to clients, we set up an internal community across Europe involving colleagues who could bring information on local markets, regulators, local associations with the aim of dispatching it to the community and to clients as well. Finally, as concerns of products, we compared our tools capacities with the new requirements and we upgraded them, also adding new reporting to our current offer, in order to provide a better service to our clients.

The competence and the attractiveness of the Luxembourg market are excellent.

Alessandro MangioneAlessandro Mangione, Product manager (BNP Paribas Securities Services)

As far as the future, few points are still outstanding. Regulatory Technical Standards still have to be issued and we presume that new products such as multi-NAV will be more and more requested by asset managers and that will also face a rationalisation of MMFs’s offer. Then, it has also to be considered that the regulation also provides that the European Commission must, within five years from its entry into force, present a report on the feasibility of establishing an 80% European Union public debt quota for Public Debt CNAV MMFs.

In conclusion, I would say that a lot has been done. But my recommendation is that the attention on the topic, both from asset managers and service providers, must not wane. 

The competence and the attractiveness of the Luxembourg market are excellent and I personally think that we are just at the beginning of an interesting evolution.