Friday July 10 2020
News Source: Fund Regulation
Focus: Money Market Funds
Country: European Union
On 09th July 2020, the European Securities and Markets Authority (ESMA) published a public statement on external support under Article 35 of the Money Market Funds (MMF) Regulation.
ESMA is issuing this statement in the context of financial markets authorities recent actions to mitigate the impact of COVID-19 on the EU’s financial markets, to clarify the potential interaction between the intermediation of credit institutions and the requirements of Article 35 of the MMF Regulation on external support. It also aims to coordinate the supervisory approaches of national competent authorities (NCAs) in light of these and any future liquidity challenges for MMFs in the context of the current COVID-19 pandemic.
Banking intermediation in the purchase of MMFs’ short-term assets
This statement is issued to coordinate the supervisory approaches of NCAs in light of these and any future liquidity challenges for MMFs in the context of the current COVID-19 pandemic. In this respect, the purpose of this statement is to recall certain conditions the aforementioned intermediation must comply with under the requirements of the MMF Regulation.
In the normal course, MMFs may enter into transactions with affiliated or related parties. Such affiliated or related parties may also have directly benefited from some of the measures mentioned above.
Pursuant to Article 35 of the MMF Regulation, MMFs are unable to receive external support, defined as “direct or indirect support offered to an MMF by a third party, including a sponsor of the MMF, that is intended for or in effect would result in guaranteeing the liquidity of the MMF or stabilising the NAV per unit or share of the MMF”.
ESMA is therefore of the view that it is relevant to clarify the potential interaction between the above mentioned intermediation of credit institutions and the requirements of Article 35 of the MMF Regulation.
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