Documents considered by the Committee on 16 September 2015 - European Scrutiny Contents

7 Financial services: Money Market Funds

Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; further information requested
Document details(a) Proposal for a Regulation on Money Market Funds; (b) European Central Bank Opinion on the proposal for the Regulation
Legal base(a) Article 114 TFEU, co-decision, QMV; (b) —
DepartmentHM Treasury
Document Numbers (a) (35298), 13449/13 + ADDs 1-2, COM(13) 615;

(b) (36321), 12713/14, —

Summary and Committee's conclusions

7.1 We have under scrutiny a proposed Regulation, which would introduce rules specific to Money Market Funds, and a European Central Bank Opinion on the proposal. When we considered this matter in July, we heard that it was expected that the Presidency would be recommencing consideration of the proposal, following adoption in April of a first reading text.

7.2 The Government tells us now that in fact neither the previous, Latvian, nor present, Luxembourg, Presidencies have done so. It says also that it remains unclear as to whether renegotiation will restart under the Luxembourg Presidency and, if so, whether it would be based on the European Parliament text. Nevertheless, the Government will continue to pursue a text which meets the UK's priorities.

7.3 We note the Government's interim report and await an account of further developments in due course. Meanwhile the documents remain under scrutiny.

Full details of the documents: (a) Proposal for a Regulation on Money Market Funds: (35298), 13449/13 + ADDs 1-2, COM(13) 615; (b) European Central Bank Opinion of 22.05.2014 on a proposal for a Regulation on Money Market Funds: (36321), 12713/14 —.


7.4 Money Market Funds (MMFs) are open-ended funds that invest in short-term debt securities such as Treasury bills and commercial paper. This proposed Regulation would introduce rules specific to MMFs. It would deal with investment policies, risk management, valuation rules, constant net asset value funds and external support. The European Central Bank has published this Opinion on the proposed Regulation, seeking to influence negotiation of the text.

7.5 When in October 2013 the predecessor Committee first considered the proposed Regulation it heard that the Government had reservations about aspects of the proposal related to capital buffers, repurchase agreements and eligible securitisations, and credit rating agencies. When that Committee last considered the matter, in March 2015, it heard that negotiations on the proposed Regulation had not progressed under the Latvian Presidency, but that a European Parliament text likely to be adopted in April might put pressure on the Presidency to restart discussions. The Committee was told that, in relation to some details about the likely European Parliament position, this was consistent with the European Central Bank Opinion, which the Government welcomed.

7.6 When in July we considered the matter the Government told us that in April the expected European Parliament position was indeed adopted, that the Government would be seeking amendment on two points in that position, and that it seemed likely that the Presidency would be now recommencing negotiations of the proposed Regulation. We heard that the two points the Government wished to be addressed concerned sunset clauses for Low Volatility Net Asset Value MMFs and restriction to EU debt for Public Debt Constant Net Asset Value MMFs. We looked forward to hearing about how Council consideration of the proposed Regulation was developing, particularly in relation to the reservations it had expressed to the predecessor Committee and to us. Meanwhile the documents remained under scrutiny.

The Minister's letter of 10 September 2015

7.7 The Economic Secretary to the Treasury (Harriett Baldwin) tells us now that despite the European Parliament's agreement, there has been little progress in Council consideration of the proposal. She says that:

·  there were no working groups held under the Latvian Presidency and as yet there have been no working groups under the Luxembourg Presidency;

·  it remains unclear if and when negotiations will restart under the Luxembourg Presidency;

·  it also remains unclear whether, and to what extent, proposals put forward by the Presidency will be based on the European Parliament text; and

·  the Government will continue to work closely with the Luxembourg Presidency and other Member States to try to ensure the final compromise agreed in trilogue negotiations between the Council and European Parliament is consistent with its priorities of minimising systemic risk, while ensuring that amendments to the Constant Net Asset Value MMF landscape are workable for industry and investors.

Previous Committee Reports

Thirty-seventh Report HC 219-xxxvi (2014-15), chapter 1 (18 March 2015), Fifteenth Report HC 219-xv (2014-15), chapter 9 (22 October 2014), Nineteenth Report HC 83-xviii (2013-14), chapter 12 (23 October 2013) and First Report HC 342-i (2015-16), chapter 31 (21 July 2015).

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Prepared 1 October 2015