Luxembourg's Delano on Euro MF Regs
The Luxembourg magazine Delano writes "New Money Market Fund Regulation now in force," which briefly reviews the new European Money Fund Reforms from the perspective of a major domicile, Luxembourg. They explain, "On 21 July 2018, the Luxembourg financial sector regulator CSSF issued a statement to remind the entities it supervises that Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 had come into force that very day. In other words, the new Money Market Fund Regulation is applicable, now. A stringent regulator, it is not the CSSF's job to provide background information as to what this means on a practical basis to the financial sector for the uninitiated. However, as it will have a significant impact, and will require major investment on the part of providers and other stakeholders, it is worth understanding why. To get some context, Delano talked to Marc-André Bechet, director of legal & tax at the Association of the Luxembourg Fund Industry." The update says, "According to Bechet, 'The MMFR is not an 'opt-in' regulation. The regulator took the view that that all funds that have the characteristics of a money market fund should fall under the scope of the MMFR. Even some funds that were investing in short-term fixed-income instruments, previously not subject to money market fund regulation, will now fall under the scope of the MMFR.' As such, the first step is for asset managers and management companies to, 'Take a look at their fund range and make an assessment to see if they have the criteria that would make MMFR applicable. For new funds, they should apply it immediately and for existing funds, a grandfathering period has been put in place until 21 January 2019 – although supervisory authorities would like to receive applications from funds and their managers ahead of this deadline.'" The Delano piece adds, "Going forward, Bechet believes that MMFR, 'will require significant investments by all players, including: IT platforms and robust processes, especially with regards to risk management and valuation. Beyond this, it is too early to say what its impact will be, but some form of consolidation is expected, and profit margins are likely to be further compressed.' That said, Bechet is positive, confident that, 'the industry will adapt.'"
