ICD Survey on Regulatory Reform
Institutional Cash Distributors (ICD) announced "the results of a client survey on the following MMF reform actions currently under SEC consideration: 1) additional capital buffer requirements; 2) principle redemption holdbacks; and 3) conversion to a floating net asset value." A press release says, "The ICD survey findings that are discussed in a new ICD Commentary: Costs and Consequences revealed that nearly all of the survey's respondents would decrease their MMF investments if the proposed reform options are enacted. Thirteen clients stated they would exit MMF investments entirely, with the average net estimated reduction of all respondents totaling 41%. Total institutional MMF investments are approximately 66% of the $2.6 trillion in U.S. MMF investments. Applying the survey's 41% asset reduction across U.S. institutional MMFs, these SEC proposed MMF regulations would result in an estimated loss of $714 billion in MMFs. MMFs currently invest in about 38% of total commercial paper assets. Assuming a 27% (66% x 41%) MMF reduction, their contribution to commercial paper financing would decrease by $110 billion. This would challenge companies like General Electric, Johnson & Johnson, Harley-Davidson, Procter & Gamble and other enterprise companies who rely on commercial paper as a means to finance accounts receivable, maintain inventories and meet short-term liabilities." Tory Hazard, ICD's COO/CFO comments, "The significant corrective reforms made to Rule 2a-7 by the SEC in 2010 are working, witnessed by MMF steadiness and control during the 2011 U.S. debt ceiling showdown, U.S. credit rating downgrade and the ongoing Eurozone debt crisis. To add further unnecessary regulation will negatively impact U.S. corporations, municipalities and the U.S. Treasury with more expensive financing at the worst possible time." ICD's Commentary can be downloaded at: http://www.icdportal.com/downloads/ICD-Commentary_Costs_and_Consequences.pdf.
