One of the most prominent trade groups for treasurers has intervened in EU talks on reforms to the money market funds (MMFs) sector, urging lawmakers to consider the needs of non-financial corporates.
In an 11 November letter, European Association of Corporate Treasurers (EACT) chair Jean-Marc Servat argued: “MMFs are an important cash management tool for businesses as they allow corporates to deposit their short-term cash balances in a secure manner and with quick access to their funds when needed.
“In addition, MMFs have the advantage of allowing diversification of corporates’ cash deposits, thereby reducing counterparty risk.”
Servat noted that, in a climate where banks are increasingly reluctant to accept short-term corporate deposits because of regulatory constraints, “it is of utmost importance to ensure that corporates have viable options for managing their cash balances”.
As such, Servat urged the European Commission, the European Parliament’s ECON Committee and the region’s current, Slovakian presidency to implement three safeguards in their current ‘trialogue’ talks towards new MMF regulations:
Underlining his first point, Servat stressed: “It is important to effectively allow all European corporates to invest in CNAV government debt funds by not restricting CNAV government funds’ assets to EU public debt only.
Having such a limitation in place, he explained, “would mean that EU-based corporates with a non-EU functional currency and euro-based exporters to the UK or the US – which typically need USD/GBP MMFs to park cash – would not be able to invest in those funds due to the currency mismatch”.
It is not the first time that a non-governmental, finance-industry voice has weighed in on how the EU should best manage its regulatory overhaul of the MMF sector.
As The Treasurer reported last month, ratings agency Fitch has already urged Europe’s legislators to take notes from how recent MMF reforms have played out in the US.