Last week, SEC chairwoman Mary Shapiro axed the decision to put proposed new regulatory reforms of U.S. money market funds to a vote.
It’s alleged many of the commissioners planned to vote against the proposed changes, for fear they’d have too great an impact and cause investors to seek riskier alternatives.
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The chairman of the board of IOSCO, Masamichi Kono, issued the following statement after reviewing Shapiro’s comments.
“I have taken careful note of her statement on Money Market Fund Reform in the United States. I would like to reaffirm IOSCO will continue its work to develop policy recommendations for strengthening oversight and regulation of the shadow banking system, including money market funds.”
IOSCO Committee 5 on Investment Management will meet at the end of August to consider the public feedback it received after the release of its consultation report on money market fund risk in April.
The Board will determine IOSCO’s next steps at its October meeting in Madrid.
The IOSCO paper examined the health and related risks of money market funds. It looked at how the funds support markets, as well as their different categories and characteristics. It also examines the rules surrounding their use and how they performed during the 2008 crisis.
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It says both retail and institutional investors use the funds to achieve diversified cash flow, helping them preserve capital and gain access to liquid investments.
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“Money market funds are intermediaries between shareholders seeking liquidity and credit risk diversification, and borrowers looking for short-term funding.”
The funds had more than US$ 4.7 trillion in assets under management as of Q3 2011. They typically invest in high-quality, short-term debt instruments including commercial paper and bank certificates.
The paper was written as part of the Financial Stability Board’s goal to “mitigate their susceptibility to runs and other systemic risks, and develop policy recommendations by July 2012.”