Sven Giegold

Money Market Funds: Species protection for shadow banks


This Wednesday, the European Parliament approved the results of the trialogue on the regulation of money market funds. The Greens/EFA Group has voted against the new rules because they do not effectively regulate the risky activities of shadow banks. Some money market funds, known as “Constant Net Asset Value Funds” (CNAV), promise their investors the payment of a fixed redemption value and thus act as a normal bank operating in the deposit business. A call for the complete phase-out of bank-like CNAV money market funds had been made by France and Germany as well as by the Greens/EFA group in the European Parliament but was disregarded. MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group, commented:


“A major opportunity to regulate shadow banks and improve the stability of the financial market has been missed. The original proposals by the Commission already contradicted the recommendations of the Financial Stability Board (FSB) and the European Systemic Risk Board (ESRB). Council and Parliament have gradually diluted the modest Commission’s proposals. In the Council, France and Germany gave in to pressure from Ireland, Luxembourg and Great Britain. In the European Parliament, a liberal-conservative majority of MEPs together with the Social Democrats, the group responsible for the file, voted for the continuation of shadow banks. Only one subcategory of CNAV money market funds will be phased out, two others continue to exist.

The so-called shadow banks continue to jeopardize the stability of the financial markets, since they can do business similar to banks but are not subject to the same strict rules. They must, for example, hold much less equity. This leads to unfair competition with properly regulated banks. Greens in the European Parliament will continue to insist on a comprehensive regulatory approach to shadow banks which puts financial stability and fair competition first. We call on the European Commission to make a legislative proposal as it was demanded in the Parliament’s last banking union report”.

The report tabled for plenary can be found here:

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