EUROPEAN UNION: ESMA Publishes Final Report on Money Market Fund Rules

Friday November 17 2017

On 17^th November 2017, the European Securities and Markets Authority (ESMA) published a final report on the Money Market Funds Regulation (MMFR). The final report contains final versions of the technical advice, draft implementing technical standards (ITS), and guidelines on stress test scenarios carried out by MMF managers under the MMFR. The key requirements relate to asset liquidity and credit quality, the establishment of a reporting template and stress test scenarios carried out by MMF managers.

The technical advice and implementing technical standards (ITS) have been submitted to the European Commission (EC) – in the case of the technical standards, for endorsement.

With respect to the ITS on the establishment of a reporting template and the timing of implementation of the corresponding database, ESMA confirms that managers would need to send their first quarterly reports mentioned in Article 37 to NCAs in October/November 2019 (and not in July 2018). In addition, there will be no requirement to retroactively provide historical data for any period prior to this starting date of the reporting. In terms of next steps, ESMA will now start working on the Guidelines and information technology (IT) guidance that will complement the information included in the ITS so that managers of MMFs have all the necessary information to fill in the reporting template they will send to the competent authority of their MMF, as specified in Article 37 of the MMF Regulation.

With respect to the Guidelines on stress tests, ESMA determined that in addition to those stress tests managers of MMFs will conduct – taking into account the requirements included in the sections 5.1 to 5.7 (principle-based approach) – managers of MMFs should also conduct common reference stress test scenarios. The results of these will need to be included in the abovementioned reporting template according to Article 37(4) of the MMF Regulation. The corresponding calibrations of these common reference stress test scenarios will be specified when ESMA first updates the Guidelines in a sufficiently timely manner that managers of MMFs receive the appropriate information on these fields in order to fill in the reporting template mentioned in Article 37 of the MMFR. The timing of publication of the update of the Guidelines on stress tests will be the same as the abovementioned Guidelines and IT guidance that will complement the information included in the ITS.

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