On 25 January 2022, the European Systematic Risk Board (ESRB) published a policy recommendation intended to contribute to the European Commission’s forthcoming 2022 review of the Regulation on money market funds (MMF Regulation) to address persisting systemic vulnerabilities in certain sub-sectors of private debt MMFs. The Recommendation reflects the aim of an earlier ESRB recommendation concerning reducing deposit like features being offered by certain MMFs via redemption at par in the context of the existing MMF Regulation. The recommendation has also been informed by the feedback that the European Securities and Markets Authority received in response to its consultation on the reform of the MMF Regulation. It is also consistent with the proposals of the Financial Stability Board, albeit that it does not envisage requiring MMFs to have capital buffers or a minimum balance at risk. The ESRB believes that such own funds requirements are not needed, provided that features that make MMFs similar to deposit taking institutions are reduced and features that make MMFs similar to other investment funds are increased.

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