Ireland: EU Reaches Final Agreement On Money Market Fund Reforms

MMF = money market fund
VNAV MMF = variable net asset value money market fund
CNAV MMF = constant net asset value money market fund
LVNAV MMF = low volatility money market fund

The Council of the EU has published the final compromise text of the regulation on MMFs (the “MMF Regulation”). The final rules represent a significant improvement on the rules first proposed in September 2013 and introduce new requirements relating to permissible investment policies, eligible assets, liquidity management, concentration, credit quality of investment assets and eligible securitisations. The rules will apply to all MMFs, whether they are UCITS or alternative investment funds (“AIFs”). This update focuses on the new rules applicable to public debt CNAV MMFs and LVNAV MMFs, as the majority of Irish domiciled MMFs are currently CNAV funds.

Types of MMF

According to the final compromise text, there will be three types of authorised MMF: (1) VNAV MMFs; (2) public debt CNAV MMFs; and (3) LVNAV MMFs. Public debt CNAV MMFs are defined as investing at least 99.5% of their assets in EU or non-EU government securities and securities issued by central banks and other prescribed international financial institutions. With the exception of this restriction on investment in non-governmental securities, public debt CNAV MMFs are similar to the CNAV MMFs that are currently available to investors and with which they are already familiar. LVNAV MMFs represent a new category of MMF that may be attractive to promoters of MMFs that will not qualify as public debt CNAV MMFs.


For LVNAV MMFs and public debt CNAV MMFs, at least 10% of the MMF’s assets must be comprised of daily maturing assets, reverse repurchase agreements that can be terminated within one business day or cash which can be withdrawn within one business day.  At least 30% of the assets of a LVNAV MMF or public debt CNAV MMF must be comprised of weekly maturing assets.

In calculating the weekly maturing assets of a LVNAV MMF or public debt CNAV MMF, government-issued securities that are highly liquid, can be redeemed and settled within one business day and which have a residual maturity of up to 190 days may be included in the calculation, but only up to a maximum threshold of 17.5% of the MMF’s assets.


Public debt CNAV MMFs may use amortised cost accounting in addition to using the mark to market / mark to model method. LVNAV MMFs may use amortised cost accounting, but only in relation to assets that have a residual maturity of up to 75 days. Individual assets must be marked to market if the mark to market price of the asset deviates from the price calculated using amortised cost accounting by more than 10 basis points.

The units or shares of a LVNAV MMF may be issued or redeemed at a price that is equal to the LVNAV MMF’s constant NAV, provided that the constant NAV does not deviate from the MMF’s marked to market NAV by more than 20 basis points.

Redemption Fees and Gates

Where the proportion of weekly maturing assets of a LVNAV MMF or public debt CNAV MMF falls below the 30% threshold or where the net daily redemptions on a single business day exceed 10% of total assets, the MMF manager must immediately inform the MMF’s board which must undertake a documented assessment and decide whether or not to apply liquidity fees on redemptions, redemption gates or suspension of redemptions for any period up to 15 working days. Where the proportion of weekly maturing assets falls below 10%, the board must implement either liquidity fees on redemptions or a suspension of redemptions. If, within a period of 90 days, aggregated suspensions exceed 15 days, a LVNAV or public debt CNAV MMF will automatically cease to be a LVNAV or CNAV MMF.

External Support

One of the more controversial aspects of the European Commission’s original proposal for the reform of MMFs was a requirement for CNAV MMFs to put in place a 3% capital buffer to absorb day-to-day fluctuations in the value of a CNAV MMF’s assets and to ensure that MMFs were prepared should they require support. It was also proposed that CNAV MMFs would only be able to receive external support through this capital buffer. The final compromise text provides that all sponsor support will be prohibited and there is no requirement for any capital buffer to be maintained.


At earlier stages in this process, there had been suggestions that all CNAV MMFs would be required to convert to LVNAV MMFs or that a “sunset clause” would provide that authorisations granted to LVNAV MMFs would lapse five years after the entry into force of the MMF Regulation. There is no sunset clause in the final text, which provides for a standard review of the MMF Regulation five years after its entry into force and for that review to include whether changes should be made to the regime for public debt CNAV MMFs and LVNAV MMFs.

Next Steps and Comment

The European Parliament and the Council of the EU will now formally vote to adopt the final text, which is still subject to technical changes. It is expected that the finalised, official version will be published in the Official Journal of the EU (“OJ”) in mid-2017. The MMF Regulation will enter into force 20 days after publication in the OJ and will apply 12 months from the date of entry into force. There will be an 18 month transitional period for existing MMFs from the date of entry into force, with the result that it is expected that the MMF Regulation will apply fully from late 2018 or early 2019.

The reforms of MMFs are of particular interest to the Irish funds industry, as MMFs represented 23% of the assets of all Irish domiciled funds (or €441 billion) as at July 2016. The final outcome of the negotiations, in particular the removal of the requirement for a capital buffer and the exclusion of sunset clauses in respect of CNAV MMFs and LVNAV MMFs, recognises the important role MMFs play in the European financial system for investors seeking a low risk, liquid and well diversified means of investing cash. We believe that the final provisions can work to ensure the ongoing viability of MMFs, including CNAV MMFs, while the introduction of LVNAV MMFs offers a further option for promoters and investors.  
The final compromise text may be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.