EU Looking to Impose Capital Buffer on Money-Market Funds

Plan would allow money funds to retain a stable NAV, but would impose new capital requirements on those that do.

Banks and asset managers running money-market funds may be forced by the European Union to raise capital buffers and hoard easy-to-sell assets as part of a regulatory push to tame the $4.7 trillion global industry.

Michel Barnier, the EU’s financial services chief, said such buffers would have dealt with most difficulties suffered by fixed share-price funds in the wake of the 2008 financial crisis, as he rejected calls for an outright ban from German Finance Minister Wolfgang Schaeuble, his French counterpart Pierre Moscovici and a group of EU regulators.

“Instead of seeking ever more areas to regulate, we should ensure that we are focused on tackling the root causes of the crisis—including the state’s implicit guarantee of the financial system’s biggest banks,” Syed Kamall, a U.K. Conservative lawmaker representing London in the European Parliament, said in an e-mailed statement.

“The commission is sweating over building a mousetrap when there’s a tiger on the loose.”

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