European Union: agreement on money market funds regulationRegulation on Money Market Funds • October 8th, 2020
On 14 November 2016, the European Council, the Commission and the Parliament reached a provisional agreement on a draft regulation on money market funds (MMFs).With assets under management of around EUR 1 trillion, MMFs are mainly used to invest excess cash for short periods of time. They constitute an important instrument for investors as they offer the possibility to diversify their excess cash holdings, while maintaining a high level of liquidity.However, as the 2008 financial crisis demonstrated, MMFs are vulnerable to shocks and may even amplify risks throughout the financial system. In fact, investors generally tend to redeem investments as soon as they perceive a risk, which can force funds to sell assets rapidly in order to meet redemption requests. This can cause an investor run and, by way of consequence, liquidity difficulties for an MMF, potentially producing further negative effects on other parts of the financial system.In 2010, the CESR, which has since been replaced by
