With a reform to Europe’s €1.3tn money market fund sector due to come into force on January 21, many large asset managers were ready to comply. Money market funds help investors manage cash flow. They typically invest in cash and super-safe short-term debt.
The industry’s plans were derailed after a last-minute decision by the regulator to force companies to remove a tool, the so-called share-cancellation mechanism, which is used by many money market funds to deal with negative interest rates in the eurozone.
EU regulators that oversee the largest proportion of money market funds in Europe told managers this week to remove references to the mechanism then resubmit their implementation plans.
Given the time allowed, the Irish and Luxembourg financial regulators, the Central Bank of Ireland and the Commission de Surveillance du Secteur Financier, had to backtrack on the deadline, giving fund managers two more months to comply.
In a joint statement, the watchdogs said funds will now have to comply with the regulation by March 21, provided that they submit their amended plans by the original deadline of January 21.
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