Money Market Funds Proposed EC Regulation

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INDUSTRY
PERSPECTIVES
Money Market Funds
Proposed EC Regulation
Overview
As anticipated, the European Commission published its proposal for
an EU Money Market Funds Regulation (“MMFR”) on 4 September
2013. However, this is not the end of the road for EU MMF reform
but in many ways, the beginning. Brussels rule-making can be
quite a complex process; here we give a summary of the basics.
The publication of the proposed rules by the European Commission
starts a lengthy political process called EU “codecision”. The
European Commission sets the agenda by drafting the rules, but
they then must be sent to both the European Parliament and EU
Member States in the Council who will debate and amend the
regulation in their respective institutions.
As soon as both the Parliament and the Council have individually
agreed on a new version of the MMFR text, they must come
together to reach a compromise between these two positions.
Once a final agreement is reached, it must be ratified by a vote
in the European Parliament and signed off by EU Member State
Ministers.
INDUSTRY
PERSPECTIVES
Money Market Funds Proposed EC Regulation
EU Institutions
European Commission – The European Commission is made up of 28 Commissioners
(appointed by each EU Member State). The arm of the Commission responsible for
financial services rules is the Directorate General for the Internal Market and Services,
headed by Commissioner Michel Barnier (France). The Commission has the right of
initiative to propose laws for adoption by the European Parliament and Council. In most
cases, the Commission drafts legislation to meet obligations under EU Treaties or G20
commitments. Because the Commission holds the pen first, this gives them a great deal
of power to set the legislative agenda.
EUROPEAN COMMISSION
■■
28 Commissioners
■■
Directorates-General (“DG”)
■■
Commission Services
COUNCIL OF MINISTERS
■■
■■
■■
EUROPEAN PARLIAMENT
■■
765 MEPs (up for re-election in spring
2014)
28 Ministers, one from each Member
State
Ministerial level council meetings
(e.g. ECOFIN)
COREPER (Committee of Permanent
Representatives):
- COREPER I: technical meetings
- COREPER II: Ambassadorial level
meetings
OTHER INSTITUTIONS
■■
■■
European Supervisory Authorities:
European Securities and Markets
Authority (ESMA); European Banking
Authority (EBA); European Insurance
and Occupational Pensions Authority
EIOPA;
Court of Justice (“ECJ”)
European Parliament – The European Parliament is the only directly elected institution
in Brussels. There are 765 Members of the European Parliament (MEPs) in total.
The Parliament is divided up into committees. The Economic and Monetary Affairs
Committee is responsible for amending and debating the MMFR. A Member of this
Committee will be appointed as the lead MEP who will steer the proposal through the
Parliament’s legislative process. The European Parliament is nearing the end of its
current term and MEPs will face elections in May 2014.
European Council – The European Council (or Council of Ministers) consists of the Heads
of State or Government of the EU’s 28 Member States and meets four times per year in
Council Summits. In addition to the Council Summits, the Council meets at Ministerial
level (Finance Ministers meet in meetings call “ECOFIN”), Ambassadorial level and civil
servant level. Though civil servants do much of the technical and political work in the
Council, Ministers or national leaders must sign off on final agreements.
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INDUSTRY
PERSPECTIVES
Money Market Funds Proposed EC Regulation
Timing and Next Steps
The EU political and legislative process takes a great deal of time and it could likely be 18
months or two years before we see the MMFR finalised at the political level.
EU Member States are currently more focussed on macro-economic and crisis-related
issues. Money market fund reform though important is not currently at the top of the EU
political agenda.
Furthermore, MEPs will cease to carry out legislative work in late March or early April
next year to campaign for elections in May.
After the rules are agreed at the political level, the European Securities and Markets
Authority (ESMA) and the European Commission will have to flesh out the technical detail
ahead of implementation.
In short, though the EU codecision process timing is not fixed and is unpredictable at
times, we foresee this process taking a matter of years. Though subject to movement, we
would not expect a political agreement on the MMFR before H1 2015, and therefore we
would not expect the rules to come into force before late 2015 or early 2016. The rules
themselves could evolve considerably throughout this process.
EU legislative process – From start to finish
International agreements
Most EU financial services legislation is derived from international agreements and rules
(e.g. G20, IOSCO, FSB, Basel Committee)

“Level 1”: Legislative Process
The European Commission sets the agenda by drafting rules and the European Parliament
and Member States in the Council amend / endorse rules

“Level 2”: Technical Process
The European Supervisory Authorities (ESAs) and the European Commission (again) must
flesh out the technical detail through technical standards and guidelines

Implementation
EU Member State governments and regulatory authorities under Commission/ ESA oversight
must implement the rules in their respective jurisdictions
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INDUSTRY
PERSPECTIVES
Money Market Funds Proposed EC Regulation
Overview of EU Legislative Process – European Union Legislative Process
Policy formation
Deliberation/negotiation
Compromise
Ratification/entry into force
European
Parliament
European
Commission
Amends rules in the
Parliament’s Economic
and Monetary Affairs
Committee
EP text
Council
text
Final
MMFR text
Implementation
Council of EU
Member States
EC sets the
regulatory
agenda by
writing the first
draft of the rules
Amends rules through
civil servant/
ambassadorial/
ministerial meetings
Three EU
institutions come
together in
“Trialogues” to find
a final compromise
between EP and
Council positions
(EC mediates)
Once a final set of rules is
agreed it must be signed
off by Member States and
ratified by a vote in the
EP; it is then published in
the Official Journal of the
EU
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