On 20 July 2023, the European Commission published a report to the European Parliament and the Council on money market funds (MMFs) from a prudential and economic point of view.

The report delivers on the legal mandate under Article 46(1) and 46(2) of the MMF Regulation for the Commission to submit a report to the European Parliament and to the Council, reviewing the adequacy of the MMF Regulation from a prudential and economic point of view.

The report concludes that:

  • The MMF Regulation passed the test of liquidity stress experienced by MMFs during the COVID-19 pandemic, the recent interest rate increases and related financial asset re-pricing.
  • No EU-based MMF had to introduce redemption fees or gates or to suspend redemptions during these stress events.
  • EU MMFs focused on GBP assets withstood the redemption pressure linked to the September 2022 gilt market stress.
  • These experiences indicate that the safeguards in the MMF Regulation have been working as intended.
  • Whilst the MMF Regulation has significantly strengthened the regulatory framework for MMFs in the EU, certain shortcomings have been identified. There is scope to further increase the resilience of EU MMFs by, for example, decoupling the potential activation of liquidity management tools from regulatory liquidity thresholds. The report also highlights structural problems that are external to MMFs including those linked to the underlying short-term markets. The Commission feels that these structural problems would merit further assessment and are also currently the subject of a more in-depth analysis at the level of the FSB.