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While proposals to enforce mandatory capital buffers and fund structures have secured newspaper column inches and raised awareness of IMMFA as an organisation, they will ultimately lead to the organisation’s metamorphosis.
Crucially, the European Commission’s paper on proposed new rules for money market funds states that funds maintaining a constant net asset value – or CNAV – pose a systemic risk to the global economy and should therefore be replaced with funds that have a floating share price.
The rules also state that the use of rating agencies will be barred when the new regulations take effect next year. This poses two major problems for IMMFA, which says it is the trade association for the “European triple-A rated CNAV money market funds industry”.
EC changes will remove IMMFA’s purpose for being – certainly in its current format – which presents it with two options: either to close, or throw open its doors to the wider community. That is, of course, unless the EC does a huge about-turn – something that has not happened in the previous two consultation periods.
IMMFA’s director general, Susan Hindle Barone, admits that the organisation will need to be radically revised if the new proposals go ahead, but says that the trade group still has the ears of those that matter in Brussels. She said: “If there are no CNAV rated funds, IMMFA has to be rejigged. There isn’t a trade association that defines itself as representing VNAV funds. However, in our discussions, EFAMA is active in discussing money market regulations and represents both. “We have been thinking about this for quite a long time and we will evolve. As long as we still think there is a need to represent the funds we have represented so far, we will probably amend ourselves."
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