BETA

Activities of Syed KAMALL related to 2013/0306(COD)

Shadow reports (1)

2016/11/22
Committee: ECON
Dossiers: 2013/0306(COD)
Documents: PDF(304 KB) DOC(244 KB)

Amendments (102)

Proposal for a regulation
Recital 2

(2) On the demand side, MMFs are short- term cash management tools that provide a high degree of liquidity, diversification, stability of value of the principal invested combined with a market-based yield. MMFs are ~~mainly used by corporation~~used by a wide range of entities including charities, housing associations, local authorities and larger professional investors like corporations and pension funds seeking to invest their excess cash for a short time frame. MMFs, therefore, represent a crucial link bringing together demand and offer of short-term money.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 3

(3) Events that occurred during the financial crisis have shed light on several features of MMFs that make them vulnerable when there are difficulties in financial markets ~~and therefore may spread or amplify risks through the financial system. When the prices of the assets in which the MMFs are invested in start to decrease, especially during stressed market s~~. However, as highlighted in the European Commission's Economic Paper 472, published in 2012, "Non-bank financial instituations~~, the MMF cannot always maintain the promise to redeem immediately and to preserve the pri~~: Assessment of their impact on the stability of the financipal ~~value of a unit or share issued by the MMF to investors. This situation may trigger massive and sudden redemption requests, potentially causing broader macroeconomic consequence~~system", the activities of money market funds were not the underlying causes of financial instability during the financial crisis.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 3 a (new)

(3a) In the context of the financial crisis, it must be noted that the underlying cause of risks to financial stability operating through money market funds did not originate in money markets. In particular, risks arose within the banking sector (due to securitised loan assets) that fed through to prime MMFs and due to the behaviour of investors in response to falling NAVs. Moreover, the impact on MMF investors in terms of realised losses were either zero or very small.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 4

(4) Large redemption requests force MMFs to sell some of their investment assets in a declining market, fuelling a liquidity crisis. In these circumstances, money market issuers can face severe funding difficulties if the market of commercial papers and other money market instruments dries up. Any contagion to the short term funding market could then also represent direct and major difficulties for the financing of the financial institutions, corporations and governments~~, thus the economy~~. It should be noted that those MMFs that suffered the biggest redemptions during the crisis did so because of their real or perceived exposure to the financial sector, and had little to do with their being CNAV or VNAV. The European Commission's Economic Paper 472, published in 2012, makes no distinction between CNAV or VNAV funds.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 7

(7) Uniform rules on MMFs are also necessary to ensure smooth operation of the short term funding market for financial institutions, corporate issuers of short term debt and governments. They are also required to ensure equal treatment among MMF investors and to avoid that late redeemers have to support additional inconvenience when redemptions are temporarily suspended or when the MMF is liquidated. However in stressed market conditions, redemption gates and/or fee provisions may be used by the CNAV MMF manager in order to eliminate the 'first mover' advantage whilst protecting investors' money.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 29

(29) The MMF should have a responsibility to invest in high quality eligible assets. Therefore, a MMF should have a prudent and rigorous internal assessment procedure for determining the credit quality of the money market instruments in which it intends to invest. In accordance with Union legislation limiting over-reliance on credit ratings, it is important that MMFs avoid any mechanistic reliance on ratings issued by rating agencies when assessing the quality of eligible assets. For this purpose the MMF should establish an internal rating system based on a harmonised rating scale and an internal assessment procedure.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 29 a (new)

(29a) Taking note of the work done by international bodies, such as IOSCO and the FSB, as well as in European legislation, such as Regulation 462/2013 and Directive 2013/14/EU, on reducing investor overreliance on credit ratings, it is not appropriate to explicitly ban any product, not just MMFs, from soliciting or financing an external credit rating.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 30

(30) For the purpose of avoiding that MMF managers use different assessment criteria for evaluating the credit risk of a money market instrument and thus attribute different risk characteristics to the same instrument, it is essential that managers rely on the same criteria. To this effect the rating criteria should be precisely defined and harmonized. Examples of internal rating criteria are quantitative measures on the issuer of the instrument, such as financial ratios, balance sheet dynamics, profitability guidelines, which are evaluated and compared to those of industry peers and groups; qualitative measures on the issuer of the instrument, such as management effectiveness, corporate strategy, which are analysed with a view to determining that the issuer's overall strategy does not impede on its future credit quality. The highest internal ratings should reflect the fact that the creditworthiness of the issuer of the instruments is maintained at all times at the highest possible levels.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 31

(31) In order to develop a transparent and coherent internal rating system, the manager should document the procedures used for the internal assessment. This should ensure that the procedure follows a clear set of rules that can be monitored and that the methodologies employed are communicated upon request to the interested stakeholders.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 39

(39) It is important that the risk management of MMFs not be biased by short-term decisions influenced by the possible rating of the MMF. Therefore, it is necessary to prohibit a MMF or its manager from requesting that the MMF is rated by a credit rating agency in order to avoid that this external rating is used for marketing purposes. The MMF or its manager should also refrain from using alternative methods for obtaining a rating of the MMF. Should the MMF be awarded an external rating, either on the own initiative of the credit rating agency or following request by a third party that is independent of the MMF or the manager and does not act on behalf of any of them, the MMF manager should refrain from relying on criteria that would be attached to that external rating. For ensuring appropriate liquidity management it is necessary that the MMFs establish sound policies and procedures to know their investors. The policies that the manager has to put in place should help understanding the MMF's investor base, to the extent that large redemptions could be anticipated. In order to avoid that the MMF faces sudden massive redemptions, particular attention should be paid to large investors representing a substantial portion of the MMF's assets, as with one investor representing more than the proportion of daily maturing assets. In this case the MMF should increase its proportion of daily maturing assets to the proportion of that investor. The manager should whenever possible look at the identity of the investors, even if they are represented by nominee accounts, portals or any other indirect buyer.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 41

(41) In order to reflect the actual value of assets, the use of marking to market should be the preferred method for valuing the assets of MMFs. A manager should not be allowed to use the marking to model valuation method when marking to market provides a reliable value of the asset, as the mark to model method is prone to provide less accurate valuation. Assets such as treasury and local authority bills, medium- or short-term notes are generally the ones that are expected to have a reliable marking to market. For valuing commercial papers or certificates of deposit, the manager should check if accurate pricing is provided by a secondary market. The buy- back price offered by the issuer should also be considered to represent a good estimate of the value of the commercial paper. In all other cases the manager should estimate the value, for example using market data such as yields on comparable issues and comparable issuers. Any model used in 'mark-to-model' pricing should be reviewed and approved by the appropriate competent authority and pricing data should be provided by recognised independent pricing vendors.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 41 a (new)

(41a) During the financial crisis, both CNAV and VNAV funds experienced dramatic and serious outflows due to investors' fears about their exposure to the financial sector, rather than concerns about the MMF vehicle itself. Although it is true that many CNAV funds in the US were subject to extreme pressures, in the EU, many VNAV funds faced similar problems. There is no evidence to suggest that CNAVs are more systemically risky than VNAV funds, a point born out by the European Commission's Economic Paper 472, published in 2012, "Non-bank financial institutions: Assessment of their impact on the stability of the financial system".

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 45

(45) In order to be able to ~~absorb day-to- day fluctuations in the value of a~~mitigate potential client redemptions in times of severe market stress, all CNAV MMF's assets and allow it to offer a constant NAV per unit or share, the CNAV MMF should have at all times a NAV buffer amounting to at least 3% of its assets. The NAV buffer should serve as an absorbing mechanism for maintaining the constant NAV. All differences between the constant NAV per unit or share and the NAV per unit or share should be neutralized by using the NAV buffer. During stressed market situations, when the differences can rapidly increase, a procedure should ensure that the whole chain of management is involved. This escalation procedure should permit the senior management to take rapid remedy acmust have in place, and use when appropriate, a redemption gate and/or fee provisions to enable MMF managers to respond to periods of extreme market stress, and which prevent and/or disincentivise 'early redemptions' from leaving other investors unfairly exposed to market stress. The liquidity fee shall be equivalent to the actual cost of liquidating assets to meet the client redemption during periods of market stress and not a penal charge over and above what would offset losses imposed on other investors by the redemptions.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 46

(46) A~~s a~~ CNAV MMF ~~that does not maintain the NAV buffer at the required level is not capable of sustaining a constant NAV per unit or share, it should be required to fluctuate the NAV and~~shall cease to be a CNAV MMF~~. T~~ where~~fore, where despite the~~, having use ofd the escalation procedure the amount of the NAV buffer remains for one month below the required 3% by 10 basis points, the CNAV MMF should automatically convert into a MMF that is not allowed to use amortised cost accounting or rounding to the nearest percentage point. If before the end of the one month allowed for the replenishment a competent authority has justifiable reasons demonstrating the incapacity of the CNAV MMF to replenish the buffer, it should have the power to convert the CNAV MMF into a MMF other than a CNAV MMF. The NAV buffer is the only vehicle through which external support to a CNAV MMF can be providredemption gates and/or fees, the MMF has not been repaired within 30 days. In that case, the CNAV MMF should automatically convert to a VNAV fund or be liquidated.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 2

(2) On the demand side, MMFs are short- term cash management tools that provide a high degree of liquidity, diversification, stability of value of the principal invested combined with a market-based yield. MMFs are ~~mainly used by corporation~~used by a wide range of entities including charities, housing associations, local authorities and larger professional investors like corporations and pension funds seeking to invest their excess cash for a short time frame. MMFs, therefore, represent a crucial link bringing together demand and offer of short-term money.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 48

(48) Investors should be clearly informed, before they invest in a MMF, if the MMF is of a short-term nature or of a standard nature and if the MMF is of a CNAV type or not. In order to avoid misplaced expectations from the investor it must also be clearly stated in any marketing document that MMFs are not a guaranteed investment vehicle. ~~CNAV MMFs should clearly explain to investors the buffer mechanism they are applying to maintain the constant NAV per unit or share.~~

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 3

(3) Events that occurred during the financial crisis have shed light on several features of MMFs that make them vulnerable when there are difficulties in financial markets and therefore may spread or amplify risks through the financial system. When the prices of the assets in which the MMFs are invested in start to decrease, especially during stressed market situations, the MMF cannot always maintain the promise to redeem immediately and to preserve. However, as highlighted in the European Commission's Economic Paper 472, published in 2012, "Non-bank financial institutions: Assessment of their impact on the stability of the ~~pri~~financipal ~~value of a unit or share issued by the MMF to investors. This situation may trigger massive and sudden redemption requests, potentially causing broader macroeconomic consequence~~system", the activities of money market funds were not the underlying causes of financial instability during the financial crisis.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 3 a (new)

(3a) In the context of the financial crisis, it must be noted that the underlying cause of risks to financial stability operating through money market funds did not originate in money markets. In particular, risks arose within the banking sector (due to securitised loan assets) that fed through to prime MMFs and due to the behaviour of investors in response to falling NAVs. Moreover, the impact on MMF investors in terms of realised losses were either zero or very small.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 3 b (new)

(3b) During the financial crisis, both CNAV and VNAV funds experienced dramatic and serious outflows due to investors' fears about their exposure to the financial sector, rather than concerns about the MMF vehicle itself. Although it is true that many CNAV funds in the US were subject to extreme pressures, in the EU, many VNAV funds faced similar problems. There is no evidence to suggest that CNAVs are more systemically risky than VNAV funds, a point borne out by the European Commission's Economic Paper 472, published in 2012, "Non-bank financial institutions: Assessment of their impact on the stability of the financial system".

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 54

(54) It is essential to carry out a review of this Regulation in order to assess the appropriateness of exempting certain CNAV MMFs that concentrate their investment portfolios on debt issued by the Member States from the requirement to establish a capital buffer that amounts to at least 3 % of the total value of the CNAV MMF's assets. Therefore, during the three years after the entry into force of this Regulation, the Commission should analyse the experience acquired in applying this Regulation and the impacts on the different economic aspects attached to the MMFs. The debt issued or guaranteed by the Member States represents a distinct category of investment displaying specific credit and liquidity traits. In addition, sovereign debt plays a vital role in financing the Member States. The Commission should evaluate the evolution of the market for sovereign debt issued or guaranteed by the Member States and the possibility to create a special framework for MMF that concentrate their investment policy on that type of debt.

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 4 a (new)

(4a) During the 2008 crisis, it was only dollar-denominated CNAV funds which experienced mass redemptions, not those denominated in sterling or euro, which in fact experienced mass inflows. There was a flight to quality within the CNAV fund sector, not a flight from the CNAV sector itself.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 7

(7) Uniform rules on MMFs are also necessary to ensure smooth operation of the short term funding market for financial institutions, corporate issuers of short term debt and governments. They are also required to ensure equal treatment among MMF investors and to avoid that late redeemers have to support additional inconvenience when redemptions are temporarily suspended or when the MMF is liquidated. However in stressed market conditions, redemption gates and/or fee provisions may be used by the CNAV MMF manager in order to eliminate the 'first mover' advantage whilst protecting investors' money.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 8 – paragraph 1 – point d a (new)

(da) debt securities

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 29

(29) The MMF should have a responsibility to invest in high quality eligible assets. Therefore, a MMF should have a prudent and rigorous internal assessment procedure for determining the credit quality of the money market instruments in which it intends to invest. In accordance with Union legislation limiting over-reliance on credit ratings, it is important that MMFs avoid any mechanistic reliance on ratings issued by rating agencies when assessing the quality of eligible assets. For this purpose the MMF should establish an internal rating system based on a harmonised rating scale and an internal assessment procedure.deleted

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 29 a (new)

(29a) Taking note of the work done by international bodies, such as IOSCO and the FSB, as well as in European legislation, such as Regulation (EU) No 462/2013 and Directive 2013/14/EU, on reducing investor overreliance on credit ratings, it is not appropriate to explicitly ban any product, not just MMFs, from soliciting or financing an external credit rating.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 30

(30) For the purpose of avoiding that MMF managers use different assessment criteria for evaluating the credit risk of a money market instrument and thus attribute different risk characteristics to the same instrument, it is essential that managers rely on the same criteria. To this effect the rating criteria should be precisely defined and harmonized. Examples of internal rating criteria are quantitative measures on the issuer of the instrument, such as financial ratios, balance sheet dynamics, profitability guidelines, which are evaluated and compared to those of industry peers and groups; qualitative measures on the issuer of the instrument, such as management effectiveness, corporate strategy, which are analysed with a view to determining that the issuer's overall strategy does not impede on its future credit quality. The highest internal ratings should reflect the fact that the creditworthiness of the issuer of the instruments is maintained at all times at the highest possible levels.deleted

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 31

(31) In order to develop a transparent and coherent internal rating system, the manager should document the procedures used for the internal assessment. This should ensure that the procedure follows a clear set of rules that can be monitored and that the methodologies employed are communicated upon request to the interested stakeholders.deleted

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 39

(39) It is important that the risk management of MMFs not be biased by short-term decisions influenced by the possible rating of the MMF. Therefore, it is necessary to prohibit a MMF or its manager from requesting that the MMF is rated by a credit rating agency in order to avoid that this external rating is used for marketing purposes. The MMF or its manager should also refrain from using alternative methods for obtaining a rating of the MMF. Should the MMF be awarded an external rating, either on the own initiative of the credit rating agency or following request by a third party that is independent of the MMF or the manager and does not act on behalf of any of them, the MMF manager should refrain from relying on criteria that would be attached to that external rating. For ensuring appropriate liquidity management it is necessary that the MMFs establish sound policies and procedures to know their investors. The policies that the manager has to put in place should help understanding the MMF's investor base, to the extent that large redemptions could be anticipated. In order to avoid that the MMF faces sudden massive redemptions, particular attention should be paid to large investors representing a substantial portion of the MMF's assets, as with one investor representing more than the proportion of daily maturing assets. In this case the MMF should increase its proportion of daily maturing assets to the proportion of that investor. The manager should whenever possible look at the identity of the investors, even if they are represented by nominee accounts, portals or any other indirect buyer.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 41

(41) In order to reflect the actual value of assets, the use of marking to market should be the preferred method for valuing the assets of MMFs. A manager should not be allowed to use the marking to model valuation method when marking to market provides a reliable value of the asset, as the mark to model method is prone to provide less accurate valuation. Assets such as treasury and local authority bills, medium- or short-term notes are generally the ones that are expected to have a reliable marking to market. For valuing commercial papers or certificates of deposit, the manager should check if accurate pricing is provided by a secondary market. The buy- back price offered by the issuer should also be considered to represent a good estimate of the value of the commercial paper. In all other cases the manager should estimate the value, for example using market data such as yields on comparable issues and comparable issuers. Any model used in 'mark-to-model' pricing should be reviewed and approved by the appropriate competent authority and pricing data should be provided by recognised independent pricing vendors.

2015/01/12
Committee: ECON

Proposal for a regulation
Recital 45

(45) In order to be able to ~~absorb day-to- day fluctuations in the value of a~~mitigate potential client redemptions in times of severe market stress, all CNAV MMF's assets and allow it to offer a constant NAV per unit or share, the CNAV MMF should have at all times a NAV buffer amounting to at least 3% of its assets. The NAV buffer should serve as an absorbing mechanism for maintaining the constant NAV. All differences between the constant NAV per unit or share and the NAV per unit or share should be neutralized by using the NAV buffer. During stressed market situations, when the differences can rapidly increase, a procedure should ensure that the whole chain of management is involved. This escalation procedure should permit the senior management to take rapid remedy acmust have in place, and use when appropriate, a redemption gate and/or fee provisions to enable MMF managers to respond to periods of extreme market stress, and which prevent and/or disincentivise 'early redemptions' from leaving other investors unfairly exposed to market stress. The liquidity fee shall be equivalent to the actual cost of liquidating assets to meet the client redemption during periods of market stress and not a penal charge over and above what would offset losses imposed on other investors by the redemptions.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 16

~~[...]~~deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 46

(46) A~~s a~~ CNAV MMF ~~that does not maintain the NAV buffer at the required level is not capable of sustaining a constant NAV per unit or share, it should be required to fluctuate the NAV an~~should cease to be a CNAV MMF~~. T~~ where~~fore, where despite the~~, having use ofd the escalation procedure the amount of the NAV buffer remains for one month below the required 3% by 10 basis points, the CNAV MMF should automatically convert into a MMF that is not allowed to use amortised cost accounting or rounding to the nearest percentage point. If before the end of the one month allowed for the replenishment a competent authority has justifiable reasons demonstrating the incapacity of the CNAV MMF to replenish the buffer, it should have the power to convert the CNAV MMF into a MMF other than a CNAV MMF. The NAV buffer is the only vehicle through which external support to a CNAV MMF can be providredemption gates and/or fees, the MMF has not been repaired within 30 days. In that case, the CNAV MMF should automatically convert to a VNAV fund or be liquidated.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 17

Article 17 Internal rating system 1. Each issuer of a money market instrument in which a MMF intends to invest shall be assigned an internal rating pursuant to the internal assessment procedure. 2. The structure of the internal rating system shall comply with all of the following requirements: (a) the internal rating system shall be based on a single rating scale which exclusively reflects quantification of the credit risk of the issuer. The rating scale shall have six grades for non-defaulted issuers and one for defaulted issuers; (b) there shall be a clear relationship between issuer grades reflecting the credit risk of an issuer and the rating criteria used to distinguish that level of credit risk; (c) the internal rating system shall take into account the short-term nature of money market instruments. 3. The rating criteria referred to in paragraph 2(b) shall fulfil all of the following requirements: (a) comprise at least quantitative and qualitative indicators on the issuer of the instrument, and the macro-economic and financial market situation; (b) refer to the common numerical and qualitative reference values used to assess the quantitative and qualitative indicators; (c) be adequate for the particular type of issuer. At least the following types of issuers shall be distinguished: sovereign, regional or local public authority, financial corporations, and non-financial corporations. (d) In case of exposure to securitisations, take into account the credit risk of the issuer, the structure of the securitisation and the credit risk of the underlying assets.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 48

(48) Investors should be clearly informed, before they invest in a MMF, if the MMF is of a short-term nature or of a standard nature and if the MMF is of a CNAV type or not. In order to avoid misplaced expectations from the investor it must also be clearly stated in any marketing document that MMFs are not a guaranteed investment vehicle. CNAV MMFs should clearly explain to investors the ~~buffer~~safeguard mechanisms they are applying to maintain ~~the constant NAV per unit or share~~and reinforce their resilience to losses and their ability to satisfy significant redemption requests.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 18

Article 18 Documentation 1. A manager of a MMF shall document its internal assessment procedure and the internal rating system. Documentation shall include: (a) the design and operational details of its internal assessment procedures and internal rating systems in a manner that allows competent authorities to understand the assignment to specific grades and to evaluate the appropriateness of an assignment to a grade; (b) the rationale for and the analysis supporting the manager's choice of the rating criteria and of its frequency of review. This analysis shall include the parameters, the model and the limits of the model used to choose the rating criteria; (c) all major changes in the internal assessment procedure, including identification of the triggers of changes; (d) the organisation of the internal assessment procedure, including the rating assignment process and the internal control structure; (e) complete internal rating histories on issuers and recognised guarantors; (f) the dates of assignment of internal ratings; (g) the key data and methodology used to derive the internal rating, including key rating assumptions; (h) the person or persons responsible for the internal rating assignment. 2. The internal assessment procedure shall be detailed in the fund rules or rules of incorporation of the MMF and all documents referred to in paragraph 1 shall be made available upon request by the competent authorities of the MMF and the competent authorities of the manager of the MMF.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Recital 54

(54) It is essential to carry out a review of this Regulation in order to assess the appropriateness of exempting certain CNAV MMFs that concentrate their investment portfolios on debt issued by the Member States from the requirement to establish a capital buffer that amounts to at least 3 % of the total value of the CNAV MMF's assets. Therefore, during the three years after the entry into force of this Regulation, the Commission should analyse the experience acquired in applying this Regulation and the impacts on the different economic aspects attached to the MMFs. The debt issued or guaranteed by the Member States represents a distinct category of investment displaying specific credit and liquidity traits. In addition, sovereign debt plays a vital role in financing the Member States. The Commission should evaluate the evolution of the market for sovereign debt issued or guaranteed by the Member States and the possibility to create a special framework for MMF that concentrate their investment policy on that type of debt.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 19

Article 19 Delegated acts The Commission shall be empowered to adopt delegated acts in accordance with Article 44 specifying the following points: (a) the conditions under which the assignment methodologies are deemed to be prudent, rigorous, systematic and continuous and the conditions of the validation, referred to in Article 16(2); (b) the definitions of each grade with respect to the quantification of the credit risk of an issuer referred to in Article 17(2)(a), and the criteria to determine the quantification of the credit risk referred to in Article 17(2)(b); (c) the precise reference values for each qualitative indicator and the numerical reference values for each quantitative indicator. These reference values of the indicators shall be specified for each rating grade taking into account the criteria in Article 17(3); (d) the meaning of material change as referred to in Article 16(3)(c).deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 20

Article 20 Governance of the credit quality assessment 1. The internal assessment procedures shall be approved by the senior management, the governing body, and, where it exists, the supervisory function of the manager of the MMF. These parties shall have a good understanding of the internal assessment procedures, the internal rating systems and the assignment methodologies of the manager and detailed comprehension of the associated reports. 2. Internal ratings-based analysis of the MMF's credit risk profile shall be an essential part of the reporting to the parties referred to in paragraph 1. Reporting shall include at least the risk profile by grade, migration across grades, estimation of the relevant parameters per grade, and comparison of realised default rates. Reporting frequencies shall depend on the significance and type of information and shall be at least annual. 3. Senior management shall ensure, on an on-going basis that the internal assessment procedure is operating properly. Senior management shall be regularly informed about the performance of the internal assessment process, the areas where deficiencies were identified, and the status of efforts and actions taken to improve previously identified deficiencies.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 1 – introductory part

1. A ~~standard~~ MMF shall comply at all times with all of the following requirements:

2013/12/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 2

2. A ~~standard~~ MMF may invest up to 10% of its assets in money market instruments issued by a single body.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 3

3. Notwithstanding the individual limit laid down in paragraph 2, a standard MMF may combine, where this would lead to investment of up to 15% of its assets in a single body, any of the following: (a) investments in money market instruments issued by that body; (b) deposits made with that body; (c) OTC financial derivative instruments giving counterparty risk exposure to that body.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 4

4. All portfolio assets that a ~~standard~~ MMF invests in according to paragraphs 2 and 3 shall be disclosed to MMF investors.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 5

~~5. A standard MMF shall not take the form of a CNAV MMF.~~deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 24 – paragraph 1 – point b

(b) the ~~sophistication~~profile of the different investors;

2013/12/12
Committee: ECON

Proposal for a regulation
Article 24 – paragraph 1 – point c

~~(c) the risk aversion of the different investors;~~deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 24 – paragraph 1 a (new)

1a. Where the MMF investors route their investments via an intermediary, the MMF manager should seek, and the intermediary should provide, data allowing the manager of the MMF to manage appropriately the liquidity and investor concentration of the MMF.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 26 – paragraph 4 – subparagraph 3

~~Whe~~Any model used in 'mark~~ing~~ -to -model~~, no valuation models based on amortised cost shall be used~~' pricing should be revised and approved by the appropriate competent authority and pricing data should be provided by recognised independent pricing vendors.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 29 – paragraph 1

1. A CNAV MMF shall not use the amortised cost method for valuation, or advertise a constant NAV per unit or share, or round the constant NAV per unit or share to the nearest percentage point or its equivalent when the NAV is published in a currency unit unless it has been explicitly authorised as a CNAV MMF. have in place redemption gates and/or fee provisions. The MMF board or management company shall decide whether to implement a redemption gate and/or fees once a specific trigger has been breached. If the MMF board or management company decides to implement a redemption and/or fees, the MMF board of management company must alert ESMA and/or the relevant competent authorities. The redemption fee should be set to ensure that remaining shareholders do not suffer the liquidity costs of redeeming shareholders. The redemption fee shall be equivalent to the actual cost of liquidating assets to meet the client redemption in stressed market conditions and not a penal charge over and above what would offset losses imposed on other investors by the redemption. If the redemption gate and/or fee have not repaired the CNAV MMF within 30 days, the CNAV MMF shall convert to a VNAV MMF or be liquidated.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 29 – paragraph 1 a (new)

1a. ESMA shall determine the nature of the trigger for redemption gates and/or fees and how the fee should be calculated to ensure that the fee is no greater than that which would be charged for redemptions in normal market conditions.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 29 – paragraph 2

2. A CNAV MMF shall satisfy all the following additional requirements: (a) it has established a NAV buffer in accordance with the requirements in Article 30; (b) the competent authority of the CNAV MMF is satisfied with a detailed plan by the CNAV MMF specifying the modalities of the use of the buffer in accordance with Article 31; (c) the competent authority of the CNAV MMF is satisfied with the CNAV MMF's arrangements to replenish the buffer and with the financial strength of the entity expected to fund the replenishment; (d) the rules or instruments of incorporation of the CNAV MMF provide clear procedures for the conversion of the CNAV MMF into a MMF that is not allowed to use the amortised cost accounting or the rounding methods; (e) the CNAV MMF and its manager have clear and transparent governance structures that unambiguously identify and assign responsibilities for the different governance levels; (f) the CNAV MMF has established clear and effective communication tools towards investors that ensure prompt information in relation to any use or replenishment of the NAV buffer and the conversion of the CNAV MMF; (g) the rules or instruments of incorporation of the CNAV MMF state clearly that the CNAV MMF cannot receive external support other than through the NAV buffer.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 30

~~[...]~~deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 31

Article 31 Use of the NAV buffer 1. The NAV buffer shall only be used in case of subscriptions and redemptions to equalise the difference between the constant NAV per unit or share and the NAV per unit or share. 2. For the purposes of paragraph 1, in case of subscriptions: (a) where the constant NAV at which a unit or share is subscribed is higher than the NAV per unit or share, the positive difference shall be credited to the reserve account; (b) where the constant NAV at which a unit or share is subscribed is lower than the NAV, the negative difference shall be debited from the reserve account. 3. For the purposes of paragraph 1, in case of redemptions: (a) where the constant NAV at which a unit or share is redeemed is higher than the NAV per unit or share, the negative difference shall be debited from the reserve account; (b) where the constant NAV at which a unit or share is redeemed is lower than the NAV per unit or share, the positive difference shall be credited to the reserve account.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 32

Article 32 Escalation procedure 1. A CNAV MMF shall establish and implement an escalation procedure that ensures that the negative difference between the constant NAV per unit or share and the NAV per unit or share is considered by persons competent to act for the fund in a timely manner. 2. The escalation procedure shall require that: (a) where the negative difference reaches 10 basis points or its equivalent when the NAV is published in a currency unit, the senior management of the manager of the CNAV MMF be informed; (b) where the negative difference reaches 15 basis points or its equivalent when the NAV is published in a currency unit, the board of directors of the manager of the CNAV MMF, the competent authorities of the CNAV MMF and ESMA be informed; (c) the competent persons assess the cause of the negative difference and take appropriate action to reduce the negative effects.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 33

Article 33 Replenishment of the NAV buffer 1. Whenever the amount of the NAV buffer falls below 3% it shall be replenished. 2. When the NAV buffer has not been replenished and for one month the amount of the NAV buffer stays below the 3% referred to in Article 30(1) by 10 basis points the MMF shall automatically cease to be a CNAV MMF and be prohibited from using the amortised cost or rounding methods. The CNAV MMF shall inform immediately each investor thereof in writing and in a clear and comprehensible way.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 34

Article 34 Powers of the competent authority concerning the NAV buffer 1. The competent authority of the CNAV MMF shall be immediately notified of any decrease below 3% in the amount of the NAV buffer. 2. The competent authority of the CNAV MMF and ESMA shall be immediately notified when the amount of the NAV buffer decreases by 10 basis points below the 3% referred to in Article 30(1). 3. Following the notification referred to in paragraph 1, the competent authority shall closely monitor the CNAV MMF. 4. Following the notification in paragraph 2, the competent authority shall control that the NAV buffer has been replenished or the MMF has ceased to hold itself as a CNAV MMF and informed accordingly its investors.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 35 – paragraph 1

~~1. A CNAV MMF may not receive external support other than in the form and under the conditions laid down in Articles 30 to 34.~~deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 35 – paragraph 2

2. ~~MMFs other than CNAV~~ MMFs shall not be allowed to receive external support, except under the conditions laid down in Article 36.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 14 – paragraph 4

4. The aggregate amount of cash provided to the same counterparty of a MMF in reverse repurchase agreements shall not exceed 210% of its assets.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 4 a (new)

4a. Investors in an MMF shall receive at least monthly the following information: a) the liquidity profile of the MMF including the cumulative percentage of investments maturing overnight and within one week and how that liquidity is achieved; b) the credit profile and portfolio composition; c) the WAM and WAL of the MMF; d) the cumulative concentration of the top 5 investors in the MMF.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5

5. In addition to the information to be provided in accordance with paragraphs 1 to 4, a CNAV MMF shall explain clearly to investors and potential investors the use of the amortised cost method and/or of rounding. A CNAV MMF shall indicate the amount of its NAV buffer, the procedure to equalise the constant NAV per unit or share and the NAV per unit or share and shall state clearly the role of the buffer and the risks related to it. The CNAV MMF shall clearly indicate the modalities of replenishing the NAV buffer and the entity expected to fund the replenishment. It shall make available to investors all information concerning compliance with the conditions set out in Article 29(2)(a) to (g)procedure to apply the redemption gate and/or fees and the circumstances under which these will be triggered.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5 a (new)

5a. An MMF shall disclose on a regular basis how much of its overall portfolio consists of: a) money market instruments issued by the MMF sponsor; b) if applicable, securitisations issued by the MMF sponsor; c) if the sponsor is a credit institution, cash deposits with the MMF sponsor; and d) exposure to the MMF sponsor as a counterparty to OTC derivative transactions.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5 b (new)

5b. Where and when the MMF sponsor invests in the shares or units of the MMF, the fund shall disclose to the other investors in the MMF the total amount the sponsor has invested in the MMF, and shall subsequently notify the other investors of any change to the total shares or units held.

2013/12/12
Committee: ECON

Proposal for a regulation
Article 16

~~[...]~~deleted

2015/01/12
Committee: ECON

Proposal for a regulation
Article 17

1. Each issuer of a money market instrument in which a MMF intends to invest shall be assigned an internal rating pursuant to the internal assessment procedure. 2. The structure of the internal rating system shall comply with all of the following requirements: (a) the internal rating system shall be based on a single rating scale which exclusively reflects quantification of the credit risk of the issuer. The rating scale shall have six grades for non-defaulted issuers and one for defaulted issuers; (b) there shall be a clear relationship between issuer grades reflecting the credit risk of an issuer and the rating criteria used to distinguish that level of credit risk; (c) the internal rating system shall take into account the short-term nature of money market instruments. 3. The rating criteria referred to in paragraph 2(b) shall fulfil all of the following requirements: (a) comprise at least quantitative and qualitative indicators on the issuer of the instrument, and the macro-economic and financial market situation; (b) refer to the common numerical and qualitative reference values used to assess the quantitative and qualitative indicators; (c) be adequate for the particular type of issuer. At least the following types of issuers shall be distinguished: sovereign, regional or local public authority, financial corporations, and non-financial corporations. (d) In case of exposure to securitisations, take into account the credit risk of the issuer, the structure of the securitisation and the credit risk of the underlying assets.Article 17 deleted Internal rating system

2015/01/12
Committee: ECON

Proposal for a regulation
Article 43 – paragraph 3

3. By way of derogation from the first sentence of Article 30(1), an existing UCITS or AIF that meets the criteria for the definition of a CNAV MMF set out in Article 2(10) shall establish a NAV buffer of at least (a) 1% of the total value of the CNAV MMF's assets, within one year from the entry into force of this Regulation; (b) 2% of the total value of the CNAV MMF's assets, within two years from the entry into force of this Regulation; (c) 3% of the total value of the CNAV MMF's assets, within three years from the date of entry into force of this Regulationdeleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 18

1. A manager of a MMF shall document its internal assessment procedure and the internal rating system. Documentation shall include: (a) the design and operational details of its internal assessment procedures and internal rating systems in a manner that allows competent authorities to understand the assignment to specific grades and to evaluate the appropriateness of an assignment to a grade; (b) the rationale for and the analysis supporting the manager's choice of the rating criteria and of its frequency of review. This analysis shall include the parameters, the model and the limits of the model used to choose the rating criteria; (c) all major changes in the internal assessment procedure, including identification of the triggers of changes; (d) the organisation of the internal assessment procedure, including the rating assignment process and the internal control structure; (e) complete internal rating histories on issuers and recognised guarantors; (f) the dates of assignment of internal ratings; (g) the key data and methodology used to derive the internal rating, including key rating assumptions; (h) the person or persons responsible for the internal rating assignment. 2. The internal assessment procedure shall be detailed in the fund rules or rules of incorporation of the MMF and all documents referred to in paragraph 1 shall be made available upon request by the competent authorities of the MMF and the competent authorities of the manager of the MMF.Article 18 deleted Documentation

2015/01/12
Committee: ECON

Proposal for a regulation
Article 43 – paragraph 4

4. For the purposes of paragraph 3 of this Article, the reference to 3% in Articles 33 and 34 shall be interpreted as referring to the amounts of the NAV buffer mentioned in points (a), (b) and (c) of paragraph 3 respectively.deleted

2013/12/12
Committee: ECON

Proposal for a regulation
Article 19

The Commission shall be empowered to adopt delegated acts in accordance with Article 44 specifying the following points: (a) the conditions under which the assignment methodologies are deemed to be prudent, rigorous, systematic and continuous and the conditions of the validation, referred to in Article 16(2); (b) the definitions of each grade with respect to the quantification of the credit risk of an issuer referred to in Article 17(2)(a), and the criteria to determine the quantification of the credit risk referred to in Article 17(2)(b); (c) the precise reference values for each qualitative indicator and the numerical reference values for each quantitative indicator. These reference values of the indicators shall be specified for each rating grade taking into account the criteria in Article 17(3); (d) the meaning of material change as referred to in Article 16(3)(c).Article 19 deleted Delegated acts

2015/01/12
Committee: ECON

Proposal for a regulation
Article 20

1. The internal assessment procedures shall be approved by the senior management, the governing body, and, where it exists, the supervisory function of the manager of the MMF. These parties shall have a good understanding of the internal assessment procedures, the internal rating systems and the assignment methodologies of the manager and detailed comprehension of the associated reports. 2. Internal ratings-based analysisArticle 20 deleted Governance of the ~~MMF's~~ credit risk profile shall be an essential part of the reporting to the parties referred to in paragraph 1. Reporting shall include at least the risk profile by grade, migration across grades, estimation of the relevant parameters per grade, and comparison of realised default rates. Reporting frequencies shall depend on the significance and type of information and shall be at least annual. 3. Senior management shall ensure, on an on-going basis that the internal assessment procedure is operating properly. Senior management shall be regularly informed about the performance of the internal assessment process, the areas where deficiencies were identified, and the status of efforts and actions taken to improve previously identified deficiencies.quality assessment

2015/01/12
Committee: ECON

Proposal for a regulation
Article 45 – paragraph 1 – introductory part

By three years after the entry into force of this Regulation, the Commission shall review the adequacy of this Regulation from a prudential and economic point of view. In particular the review shall consider the operation of the CNAV buffer and the operation of the CNAV buffer to those CNAV MMFs that, in future, might concentrate their portfolios on debt issued or guaranteed by the Member States. The review shall:

2013/12/12
Committee: ECON

Proposal for a regulation
Article 21 – paragraph 1 – point c

(c) at least 105% of its assets shall be comprised of daily maturing assets. A short-term MMF shall not acquire any asset other than a daily maturing asset when such acquisition would result in the short-term MMF investing less than 105% of its portfolio in daily maturing assets;

2015/01/12
Committee: ECON

Proposal for a regulation
Article 21 – paragraph 1 – point d

(d) at least 230% of its assets shall be comprised of weekly maturing assets. A short-term MMF shall not acquire any asset other than a weekly maturing asset when such acquisition would result in the short-term MMF investing less than 230% of its portfolio in weekly maturing assets.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 1 – introductory part

1. A ~~standard~~ MMF shall comply at all times with all of the following requirements:

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 1 – point c

(c) at least 105% of its assets shall be comprised of daily maturing assets. A standard MMF shall not acquire any asset other than a daily maturing asset when such acquisition would result in the standard MMF investing less than 105% of its portfolio in daily maturing assets;

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 1 – point d

(d) at least 230% of its assets shall be comprised of weekly maturing assets. A standard MMF shall not acquire any asset other than a weekly maturing asset when such acquisition would result in the standard MMF investing less than 230% of its portfolio in weekly maturing assets.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 2

2. A ~~standard~~n MMF may invest up to 10% of its assets in money market instruments issued by a single body.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 3

3. Notwithstanding the individual limit laid down in paragraph 2, a standard MMF may combine, where this would lead to investment of up to 15% of its assets in a single body, any of the following: (a) investments in money market instruments issued by that body; (b) deposits made with that body; (c) OTC financial derivative instruments giving counterparty risk exposure to that body.deleted

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 4

4. All portfolio assets that a ~~standard~~ MMF invests in according to paragraphs 2 and 3 shall be disclosed to MMF investors.

2015/01/12
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 5

~~5. A standard MMF shall not take the form of a CNAV MMF.~~deleted

2015/01/12
Committee: ECON

Proposal for a regulation
Article 23

~~The MMF or the manager of the MMF shall not solicit or finance a credit rating agency for rating the MMF.~~Article 23 deleted MMF credit ratings

2015/01/09
Committee: ECON

Proposal for a regulation
Article 24 – paragraph 1 – point b

(b) the ~~sophistication~~profile of the different investors;

2015/01/09
Committee: ECON

Proposal for a regulation
Article 24 – paragraph 1 – point c

~~(c) the risk aversion of the different investors;~~deleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 24 – paragraph 1 a (new)

1a. Where the MMF investors route their investments via an intermediary, the MMF manager should seek, and the intermediary should provide, data allowing the manager of the MMF to manage appropriately the liquidity and investor concentration of the MMF.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 26 – paragraph 4 – subparagraph 3

~~Whe~~Any model used in 'mark~~ing~~ -to -model~~, no valuation models based on amortised cost shall be used~~' pricing should be revised and approved by the appropriate competent authority and pricing data should be provided by recognised independent pricing vendors.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 26 – paragraph 5

5. In addition to the marking to market method referred to in paragraphs 2 and 3 and marking to model method referred to in paragraph 4, the assets of a ~~CNAV~~ MMF may also be valued by using the amortised cost method where its board of directors or the board of directors of its management company determines in good faith that the methodology reflects accurately the fair value of the relevant money market instruments held in the portfolio in accordance with generally accepted accounting principles. Where it is considered that amortization method can be used to fairly assess the value of a money market instrument, it must ensure that this will not result in a material discrepancy between the value of the money market instrument and the value calculated according to the amortization method.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 29 – paragraph 1

1. A CNAV MMF shall have in place redemption gates and/or fee provisions. The weekly maturing assets in the portfolio of a CNAV MMF shall constitute at least 30% of the assets of that CNAV MMF. The manager of a CNAV MMF shall establish, implement and consistently apply prudent and rigorous liquidity management procedures for controlling the weekly liquidity thresholds applicable to such funds. The liquidity management procedures should be clearly described in the fund rules or instruments of incorporation, as well as in the prospectus and any marketing materials. Whenever the proposition of weekly maturing assets falls below 30% the manager of the CNAV MMF shall immediately inform the Board of the MMF. Following a thorough assessment of the situation and acting exclusively in the best interest of the investors, the MMF board or management company shall decide whether to implement a redemption gate and/or fees. If the MMF board or management company decides to implement a redemption and/or fees, the MMF board or management company must inform the competent authority. The redemption fee should be set to ensure that remaining shareholders do not suffer the liquidity costs of redeeming shareholders. The redemption fee shall be equivalent to the actual cost of liquidating assets to meet the client redemption in stressed market conditions and not a penal charge over and above what would offset losses imposed on other investors by the redemption. If the redemption gate and/or fee have not repaired the CNAV MMF within 30 days, the CNAV MMF shall convert to a VNAV MMF or be liquidated. MMF shall not use the amortised cost method for valuation, or advertise a constant NAV per unit or share, or round the constant NAV per unit or share to the nearest percentage point or its equivalent when the NAV is published in a currency unit unless it has been explicitly authorised as a CNAV MMF.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 29 – paragraph 2

2. A CNAV MMF shall satisfy all the following additional requirements: (a) it has established a NAV buffer in accordance with the requirements in Article 30; (b) the competent authority of the CNAV MMF is satisfied with a detailed plan by the CNAV MMF specifying the modalities of the use of the buffer in accordance with Article 31; (c) the competent authority of the CNAV MMF is satisfied with the CNAV MMF's arrangements to replenish the buffer and with the financial strength of the entity expected to fund the replenishment; (d) the rules or instruments of incorporation of the CNAV MMF provide clear procedures for the conversion of the CNAV MMF into a MMF that is not allowed to use the amortised cost accounting or the rounding methods; (e) the CNAV MMF and its manager have clear and transparent governance structures that unambiguously identify and assign responsibilities for the different governance levels; (f) the CNAV MMF has established clear and effective communication tools towards investors that ensure prompt information in relation to any use or replenishment of the NAV buffer and the conversion of the CNAV MMF; (g) the rules or instruments of incorporation of the CNAV MMF state clearly that the CNAV MMF cannot receive external support other than through the NAV buffer.deleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 30

~~[...]~~deleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 31

1. The NAV buffer shall only be used in case of subscriptions and redemptions to equalise the difference between the constant NAV per unit or share and the NAV per unit or share. 2. For the purposes of paragraph 1, in case of subscriptions: (a) where the constant NAV at which a unit or share is subscribed is higher than the NAV per unit or share, the positive difference shall be credited to the reserve account; (b) where the constant NAV at which a unit or share is subscribed is lower than the NAV, the negative difference shall be debited from the reserve account. 3. For the purposes of paragraph 1, in case of redemptions: (a) where the constant NAV at which a unit or share is redeemed is higher than the NAV per unit or share, the negative difference shall be debited from the reserve account; (b) where the constant NAV at which a unit or share is redeemed is lower than the NAV per unit or share, the positive difference shall be credited to the reserve account.Article 31 deleted Use of the NAV buffer

2015/01/09
Committee: ECON

Proposal for a regulation
Article 32

1. A CNAV MMF shall establish and implement an escalation procedure that ensures that the negative difference between the constant NAV per unit or share and the NAV per unit or share is considered by persons competent to act for the fund in a timely manner. 2. The escalation procedure shall require that: (a) where the negative difference reaches 10 basis points or its equivalent when the NAV is published in a currency unit, the senior management of the manager of the CNAV MMF be informed; (b) where the negative difference reaches 15 basis points or its equivalent when the NAV is published in a currency unit, the board of directors of the manager of the CNAV MMF, the competent authorities of the CNAV MMF and ESMA be informed; (c) the competent persons assess the cause of the negative difference and take appropriate action to reduce the negative effects.Article 32 deleted Escalation procedure

2015/01/09
Committee: ECON

Proposal for a regulation
Article 33

Replenishment of the NAV buffer 1. Whenever the amount of the NAV buffer falls below 3% it shall be replenished. 2. When the NAV buffer has not been replenished and for one month the amount of the NAV buffer stays below the 3% referred to in Article 30(1) by 10 basis points the MMF shall automatically cease to be a CNAV MMF and be prohibited from using the amortised cost or rounding methods. The CNAV MMF shall inform immediately each investor thereof in writing and in a clear and comprehensible way.Article 33 deleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 34

1. The competent authority of the CNAV MMF shall be immediately notified of any decrease below 3% in the amount of the NAV buffer. 2. The competent authority of the CNAV MMF and ESMA shall be immediately notified when the amount of the NAV buffer decreases by 10 basis points below the 3% referred to in Article 30(1). 3. Following the notification referred to in paragraph 1, the competent authority shall closely monitor the CNAV MMF. 4. Following the notification in paragraph 2, the competent authority shall control that the NAV buffer has been replenished or the MMF has ceased to hold itself as a CNAV MMF and informed accordingly its investors.Article 34 deleted Powers of the competent authority concerning the NAV buffer

2015/01/09
Committee: ECON

Proposal for a regulation
Article 35 – paragraph 1

1. A ~~CNAV~~ MMF may not receive external support ~~other than in the form and under the conditions laid down in Articles 30 to 34~~.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 35 – paragraph 2

~~2. MMFs other than CNAV MMFs shall not be allowed to receive external support, except under the conditions laid down in Article 36.~~deleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 36

1. In exceptional circumstances justified by systemic implications or adverse market conditions the competent authority may allow a MMF other than a CNAV MMF to receive external support referred to in Article 35 that is intended for or in effect would result in guaranteeing the liquidity of the MMF or stabilising the NAV per unit or share of the MMF provided that all of the following conditions are fulfilled: (a) the MMF duly justifies the necessity of external support and demonstrates through conclusive evidence the urgent need for external support; (b) the external support is limited in terms of the amount provided and the period of time when it is made available; (c) the competent authority is satisfied that the provider of the external support is financially sound and has sufficient financial resources to withstand without any adverse effects possible losses resulting from the external support granted. 2. For the purposes of paragraph 1(c), in case the provider of the external support is an entity subject to prudential supervision the agreement of the supervisory authority of that entity shall be sought in view of ensuring that the support to be granted by the entity is subject to adequate own funds provided by that entity and is in line with the risk management system of that entity. 3. Where the conditions referred to in paragraph 1 for receiving external support are fulfilled the MMF shall immediately inform each investor thereof in writing and in a clear and comprehensible way.Article 36 deleted Exceptional circumstances

2015/01/09
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5

5. In addition to the information to be provided in accordance with paragraphs 1 to 4, a CNAV MMF shall explain clearly to investors and potential investors the use of the amortised cost method and/or of rounding. A CNAV MMF shall indicate the amount of its NAV buffer, the procedure to equalise the constant NAV per unit or share and the NAV per unit or share and shall state clearly the role of the buffer and the risks related to it. The CNAV MMF shall clearly indicate the modalities of replenishing the NAV buffer and the entity expected to fund the replenishment. It shall make available to investors all information concerning compliance with the conditions set out in Article 29(2)(a) to (g)procedure to apply the redemption gate and/or fees and the circumstances under which these will be triggered.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5 a (new)

5a. Investors in an MMF shall receive at least monthly the following information: a) the liquidity profile of the MMF including the cumulative percentage of investments maturing overnight and within one week and how that liquidity is achieved; b) the credit profile and portfolio composition; c) the WAM and WAL of the MMF; d) the cumulative concentration of the top 5 investors in the MMF.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5 b (new)

5b. An MMF shall disclose on a regular basis how much of its overall portfolio consists of: a) money market instruments issued by the MMF sponsor; b) if applicable, securitisations issued by the MMF sponsor; c) if the sponsor is a credit institution, cash deposits with the MMF sponsor; and d) exposure to the MMF sponsor as a counterparty to OTC derivative transactions.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 37 – paragraph 5 c (new)

5c. Where and when the MMF sponsor invests in the shares or units of the MMF, the fund shall disclose to the other investors in the MMF the total amount the sponsor has invested in the MMF, and shall subsequently notify the other investors of any change to the total shares or units held.

2015/01/09
Committee: ECON

Proposal for a regulation
Article 43 – paragraph 3

3. By way of derogation from the first sentence of Article 30(1), an existing UCITS or AIF that meets the criteria for the definition of a CNAV MMF set out in Article 2(10) shall establish a NAV buffer of at least (a) 1% of the total value of the CNAV MMF's assets, within one year from the entry into force of this Regulation; (b) 2% of the total value of the CNAV MMF's assets, within two years from the entry into force of this Regulation; (c) 3% of the total value of the CNAV MMF's assets, within three years from the date of entry into force of this Regulationdeleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 43 – paragraph 4

4. For the purposes of paragraph 3 of this Article, the reference to 3% in Articles 33 and 34 shall be interpreted as referring to the amounts of the NAV buffer mentioned in points (a), (b) and (c) of paragraph 3 respectively.deleted

2015/01/09
Committee: ECON

Proposal for a regulation
Article 45 – paragraph 1 – introductory part

By three years after the entry into force of this Regulation, the Commission shall review the adequacy of this Regulation from a prudential and economic point of view. In particular the review shall consider the operation of the CNAV buffer and the operation of the CNAV buffer to those CNAV MMFs that, in future, might concentrate their portfolios on debt issued or guaranteed by the Member States. The review shall:

2015/01/09
Committee: ECON