The U.S. Chamber of Commerce's Center for Capital Markets Competitiveness continues to step up its lobbying against the floating NAV option for money market mutual funds. The CCMC distributed a statement yesterday entitled, "New Regulations Impacting Corporate Treasury Activities: Money Market Fund Reform," which says, "Last month, SEC Chairman Mary Schapiro singled out money market fund reform at a conference in Washington, making it clear that regulatory changes to money market funds are coming. But just last week newly confirmed SEC Commissioner Dan Gallagher declared at a Chamber event that "We cannot know what risks money market funds pose unless ... we have a clearer understanding of the effects of the commission's 2010 money market reforms. Any rulemaking in this space could be premature and possibly unnecessary." His message reiterated a key point we made in a November 17 letter to the SEC that there first needs to be a study to understand what, if any, risks remain from last year's reforms."
The Chamber continues, "As Commissioner Gallagher is only one of five SEC commissioners, we strongly support his views and encourage his fellow commissioners and other financial regulators to take a step back and pinpoint what they are trying to solve -- based on empirical evidence. And before sealing the fate of money market funds, they should try to grasp the very important role money market funds play in meeting the business community's short-term investing and financing needs.... Many of us don't realize that money market funds provide a vital source of financing to businesses and state and local governments through the funds' purchase of corporate commercial paper (a popular short term debt instrument) and municipal bonds -- thus, redistributing much needed capital into the economy. That's why we put together a simple, easy to read brochure that explains how they help businesses manage cash flow."
The Chamber adds, "Additionally, we are hosting a conference call on Wednesday, December 21 to discuss money market fund reforms and other regulatory initiatives that could impact corporate treasurers' ability to raise capital. For example, regulators are looking to finalize money market fund reform and the Volcker Rule in the first quarter in 2012. Join our conference call to learn how you and your company can get involved in the debate. For more information, contact Kristin Angus (kangus@uschamber.com or 202-463-5502)." (To access the call, entitled, "New Regulations Impacting Corporate Treasury Activities," dial 888-461-2011; Conference ID: 7524346.)
Fitch Ratings put out a press release entitled, "Global Money Funds Defensively Positioned Against Market and Sovereign Challenges in 2012," which says, "Fitch Ratings says in a new report that its outlook for Fitch-rated money market funds (MMFs) is stable for 2012, reflecting conservative portfolio management, which leaves MMFs reasonably well-positioned to manage ongoing credit, liquidity and interest rate challenges in 2012. The Stable Outlook for MMF ratings indicates a limited likelihood of significant ratings changes over the next 12 months. Nevertheless, Fitch considers the MMF industry is facing material challenges including volatile credit markets, eurozone uncertainties, historically low interest rates, the lack of asset supply and ongoing regulatory reforms."
The release continues, "Fitch's outlook incorporates its expectation that MMF managers will continue to defensively manage their portfolios and adjust eligible issuers as needed. However, Fitch notes that the outlook for MMFs remains dependent on the credit conditions of financial issuers globally, given the lack of issuance in the non-financial sector. In response to the eurozone crisis, US MMFs have reduced or eliminated their exposure to European financial institutions while also increasing available liquidity and holdings of US Treasuries. Fitch expects this defensive credit stance to continue in 2012."
Finally, they add, "Fitch expects European MMFs will maintain large short-term primary liquidity in their portfolios against recession and eurozone sovereign risks. To limit credit risks, European MMFs are likely to stay focused on the most highly-rated financial institutions, while seeking to increase high-quality nonfinancial assets and secured investments such as repurchase agreements or high-quality asset-backed commercial papers. With potential regulatory reforms likely in 2012, especially in the US, Fitch will consider the overall implications relative to its MMF ratings criteria and investor expectations."
