The EU’s rules for money market funds have “continued to function well overall”, the European Commission said as it published a new report and accompanying guidance.
Money market funds are investment funds that provide short-term funding to businesses and governments, and typically invest in high-quality short-term debt and cash-like assets, according to the Commission's release issued on Monday.
The Commission said it had issued a set of Frequently Asked Questions alongside the report to provide additional guidance and support more consistent supervision across the EU.
The EU’s regulatory framework for these funds has applied since 2018, and the Commission’s first report in 2023 found it had performed well over time, including during periods of market stress, while noting some areas needed further assessment.
Its latest analysis said money market funds generally take a cautious approach by keeping liquidity reserves above the regulatory minimum.
New guidance on liquidity buffers
The new Frequently Asked Questions cover minimum liquidity levels and explain how liquidity buffers may be used, particularly when investors seek to withdraw money in larger volumes during times of market stress, the Commission said.
Clearer guidance is being provided on how funds should maintain and use liquidity buffers, particularly in times of market stress, Commissioner for Financial Services and the Savings and Investments Union Maria Luís Albuquerque said.
The EU has become a leading global destination for money market fund investors as the sector has grown in recent years, according to the Commission.
