Local view for "http://purl.org/linkedpolitics/eu/plenary/2017-04-04-Speech-2-591-000"
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"en.20170404.26.2-591-000"2
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"Mr President, 1 310 is the number of days between the publication of the proposal on the money market funds regulation and when we will actually have the final vote on this matter – tomorrow. This must be close to a record: money market funds (MMFs) have been held up for more than three years and four Council presidencies, because it is one of the most contentious and complex pieces of legislation we have ever dealt with. It has been a long journey, but I am delighted we have reached the right destination, an overall agreement between Parliament and the Council. I believe this is a win-win, both for the European money market fund sector and for the European taxpayer, who will be better protected.
With assets under management of around EUR 1 trillion, MMFs are an important source of short-term financing for financial institutions, corporations and governments. In Europe, around 22% of short-term debt securities issued by governments or by the corporate sector are held by MMFs. Money market funds hold 38% of the short debt issued by the banking sector.
Because of the systemic inter-connectedness between MMFs, the banking sector and corporate and government finance, their operation has been at the core of international work on shadow banking. As a result, MMFs have been scrutinised by various regulators and supervisors. Indeed, the financial crisis of 2007-2008 showed that MMFs can be vulnerable to shocks and may even spread or amplify risks. This can fuel an investor run and liquidity crisis, foreign MMFs potentially triggering negative effects on other parts of the financial system.
The agreement we have reached under the Slovak Presidency that we will vote on tomorrow addresses these systemic concerns, in particular through the following measures: liquidity and diversification requirements are strengthened, with strict daily and weekly liquidity requirements to fulfil potential redemption requests, and furthermore, the MMF portfolio will be more diversified, with stringent concentration requirements to reduce risks; assets in which MMFs can invest, including government debt, have been more strictly regulated; sponsored support to these funds is forbidden, to avoid any contagion risk; we have addressed provisions for transparency in more detail; a review clause for government CNAVs has been introduced; after five years, the Commission will report on the feasibility of establishing an 80% EU public debt quota; the report will look at the availability of short—term EU public debt instruments... I could go on – a stringent regime of fees and gates in the case of shortfalls in liquidity will address the question of run risk, and we will limit the use of the amortised accounting method for the valuation of assets.
I am particularly pleased that, apart from existing MMF models, a viable operation model for LVNAV MMFs has been introduced at Parliament’s initiative, and I believe that the run risk compared to the CNAV is significantly lower. The LVNAV cannot deviate by more than 20 points from the NAV and is far stricter than 50 basis points. This is a compromise, and I prefer a compromise which regulates the sector over no agreement and leaving an unregulated MMF sector, and it is in line with the international commitments we have made.
Colleagues, politics is a team sport, and you cannot make agreements in isolation. Let me therefore say a word of thanks to the shadow rapporteurs, Brian Hayes, Petr Ježek, Syed Kamall, Eva Joly and Fabio De Masi, and to the President of the Committee on Economic and Monetary Affairs, Roberto Gualtieri, for his political support and to Kamil Sasko, who led the negotiations on behalf of the Council. I would also like to thank the ECON secretariat and the S&D secretariat and the policy advisers.
I believe this agreement is an important step forward in ensuring the long—term stability of our financial markets. The EU has been lagging behind, as I have said, on international commitments that we have, which the US already implemented 18 months ago.
I hope, colleagues, I can rely on your overwhelming support tomorrow and that would send a clear signal and a welcome political signal that we are capable of adopting a strong, harmonised, regulatory framework ensuring financial stability and that investors get well protected all over the EU."@en1
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