Commission examines functioning of EU Money Market Funds Regulation

The EU’s regulatory framework for money market funds (MMFs) continues to function well overall, according to a report published by the European Commission on 11 May 2026, which examines the adequacy of the MMF Regulation from a prudential and economic point of view. However, the report found that the market would benefit from additional guidance, which the Commission has published alongside the report in the form of FAQs.

A cautious approach

The Commission’s first report, published in 2023, found that the EU’s MMF regulatory framework had been robust since coming into force in 2018. At the same time, the 2023 report observed that certain areas of the liquidity risks required further assessment, most notably in light of the events following the “dash-for-cash” crisis in March 2020, when sudden market stress triggered a widespread rush for liquidity. 

Building on those conclusions, this latest report confirms that EU MMFs generally take a cautious approach, keeping liquidity reserves well above the minimum regulatory thresholds set by the MMF Regulation, taking into account each fund’s specific characteristics and stress test outcomes. It suggests that this approach is due to investor scrutiny (enabled by transparency rules in the MMF Regulation), regulatory supervision and concern about reputational risks.

The Commission also found that the MMF sector as a whole has managed liquidity risks responsibly, both on an ongoing basis and in times of stressed market conditions, suggesting the different mechanisms in the MMF Regulation have been implemented consistently under ESMA’s co-ordination.

Guidance on MMF minimum liquidity levels

The accompanying FAQs provide guidance on MMFs’ minimum liquidity levels and how liquidity buffers may be used, particularly to meet rising redemption requests during times of market stress. Based on extensive data analysis, the Commission concludes that the appropriate weekly liquidity benchmark levels are 40% for stable net asset value MMFs and 20% for variable net asset value MMFs. These resilience levels would allow EU MMFs to withstand severe redemption shocks and help to ensure immediate liquidity for redemptions, especially in periods of stress when MMFs may experience redemptions over several consecutive days.

The FAQs cover:

• The main requirements on portfolio composition that asset managers of MMFs must comply with.

• How to comply with the rules relating to the minimum percentages of portfolio composition under the MMF Regulation.

• The use of liquidity management tools under the MMF Regulation by managers of certain types of MMF. 

The Commission explains that the report and FAQs can help both MMF managers and competent authorities to identify situations that may warrant closer scrutiny which should further reduce the risks of contagion to the rest of the financial system and the economy during times of stress. 

The Commission’s press release is here.

The Report is available here.

The FAQs is available here.