Reuters writes "European money market funds face cash buffer rule: EU document". The article explains, "About half of the European Union's trillion euro money market funds would have to set aside a chunk of cash under a proposed EU reform to make a run on a fund in rocky markets less likely.... The draft EU law, a copy of which was obtained by Reuters, calls for a major type of fund to have a cash buffer to help keep the financial system stable. The industry is hoping for a last minute change of heart by the EU's European Commission, which is writing the draft law that will need approval from EU states and the European Parliament to take effect. A Commission spokeswoman said the proposal is likely to be published in late June. The buffer requirement would be for so-called constant net asset value funds (CNAV) whose share price shows little change over time, like the U.S. fund that broke the buck." "These CNAV funds must establish and maintain at all times a buffer amounting to at least 3 percent of the total value of their assets," Reuters quotes the EU document. The piece adds, "An EU official said on condition of anonymity the 3 percent buffer proposal is likely to remain in the final proposal but funds could be given time to reach that level. The London-based Institutional Money Market Funds Association (IMMFA), an industry body, said a requirement for a cash buffer won't improve stability of the financial system."
