Dáil Éireann Debate, Tuesday - 3 February 2015
233. Deputy Michael McGrath asked the Minister for Finance his view on draft proposals from the European Commission on the capital buffer which must be held by constant net asset value funds; and if he will make a statement on the matter. [4326/15]
View answerIreland supports enhanced regulation of money market funds to minimise system-wide risks and we are open to the consideration of necessary change in this area. However, the European Commission's original proposal on Money Market Funds (MMF) and in particular the proposed capital buffer to be applied to constant net asset value MMFs, would in my view do considerable damage to the constant net asset value MMF industry, and we have argued to this effect at the Council's working group.
Constant net asset value funds are an important source of funding for banks and corporates and the buffer proposal which would constitute an effective ban could lead to a sudden and large scale outflow of funds to third countries and a loss of liquidity in the real economy.
Reform of MMFs should be considered and proportionate. It should also be consistent with developments elsewhere globally so as to ensure no harmful impact on the EU market or disparity between the EU and the United States. The US rules did not include a capital buffer and will, in effect, preserve most of constant net asset value funds in the U.S.Ireland will work with other member states and with the Commission to develop a better approach to regulation of MMFs in Europe. It is my view that both constant and variable net asset value MMFs could be more effectively regulated through a package of enhanced regulation which includes fees and gates and this remains my preferred solution.
