By John Filar Atwood
Of the five countries that dominate the global money market fund (MMF) market, only the U.S. has implemented reform measures in all of the eight areas recommended by the International Organization of Securities Commissions (IOSCO) in 2012. According to a new IOSCO report, the U.S., France, Luxembourg, Ireland and China account for 90 percent of global assets under management in MMFs, but China and the EU members are still developing and finalizing the relevant reforms.
The statistics are included in the newly released report on the peer review of regulation of money market funds, which IOSCO undertook in response to a request from the G20 leaders in September 2013 for IOSCO to conduct a peer review on progress regarding MMF regulatory reforms. The report examines the implementation progress made by 31 jurisdictions in adopting legislation, regulation and other policies in relation to MMFs.
Eight reform areas. IOSCO said in a press release that the report covers the implementation progress on eight reform areas covered in its 2012 report on policy recommendations for MMFs. The eight reform areas are: 1) definition of MMFs in regulation and appropriate inclusion of other investment products presenting features and investment objectives similar to MMFs; 2) limitations to the types of assets of, and risks taken by, MMFs; 3) valuation practices of MMFs; 4) liquidity management for MMFs; 5) addressing the risks and issues which may affect the stability of MMFs that offer a stable NAV; 6) use of ratings by the MMF industry; 7) disclosure to investors, and 8) MMF practices in relation to repurchase agreement transactions.
The review found that as of March 31, 2015 participating jurisdictions had made progress in introducing implementation measures across the eight reform areas, but that progress varied between jurisdictions and between reform areas. According to the report, in jurisdictions with smaller MMF markets, implementation progress was less advanced. However, four of the smaller participating jurisdictions—Brazil, India, Italy and Thailand—reported having final implementation measures in all reform areas.
Further review in 2016. The team that prepared the report recommended that further review be undertaken in 2016. The additional review would be an opportunity to assess further progress jurisdictions have made in their MMF reforms. IOSCO believes the additional review would be limited to the 15 jurisdictions identified in the current report as having a significant MMF industry in which final implementation measures are still not in effect in one or more reform areas.