Money-market funds may be forced by European Union regulators to hold minimum levels of liquid assets, and in some cases to hoard cash reserves, as part of a bid to toughen oversight of the $4.7 trillion global industry.
Michel Barnier, the EU’s financial services chief, may require money-market funds that maintain a fixed share price to build up a cash “buffer” equivalent to 3 percent of their assets, according to draft proposals obtained by Bloomberg News. Barnier has identified regulation of money-market funds as a priority in the bloc’s efforts to rein in so-called shadow banks.
Under the draft EU plans, money-market funds would also face binding rules on the types of assets they can invest in, limits on how much business they can do with a single counterparty, and restrictions on short selling. The funds are typically invested in short-term money-market instruments such as commercial paper and U.S. Treasury bills.