Economic Secretary (): Money market funds (MMFs) play
an important role in the financial system. MMFs are widely used
for cash management and provide an alternative or complement to
bank deposits for a broad range of investors, including asset
managers, insurers, pension funds, large corporates and local
authorities. However, recent periods of market stress have
highlighted the need to strengthen the resilience of these funds.
The Government, together with the Financial Conduct Authority
(FCA) and the Bank of England, have worked actively with
international partners, including with the European Commission
and at the Financial Stability Board, to enhance MMF resilience
so these funds are better able to withstand market disruption. As
part of this, the Government and FCA committed to reforming the
UK Money Market Fund Regulation (MMFR) regime, to ensure the UK's
regulatory framework appropriately supports the resilience of
these markets while maintaining our international
competitiveness. These reforms mark an important step forward in
enhancing the resilience of the wider non-bank financial sector.
In 2023, HM Treasury and FCA consulted on replacing and reforming
MMFR. The Government will now lay legislation as soon as
parliamentary time allows to establish the new regulatory
framework, under which most requirements for UK MMFs will be set
out in FCA rules and guidance. This will include guidance setting
out expectations that UK MMFs hold higher levels of liquidity.
This approach reflects internationally developed proposals that
the UK helped to shape alongside other jurisdictions. The
Government and the FCA also welcomed feedback from across the
sector to help develop a proportionate set of proposals that will
enhance the resilience of Money Market Funds. The UK's new regime
is expected to be in place by Q4 2026, subject to Parliamentary
approval, and the FCA will issue a statement shortly with further
details on its plans.
The Government recognises the cross-border nature of this sector,
and the important role that EU domiciled MMFs play in the UK
market. In March, at the Joint EU-UK Financial Regulatory Forum,
the UK and EU recognised the value of constructive engagement on
the practices that will enhance the resilience of our respective
MMF sectors. The Government therefore welcomes the
report published by European Commission on 11 May that sets out
their expectations for these funds.
The Government can confirm its intention to extend the Temporary
Marketing Permissions Regime, with a view to establishing a
longer-term solution on market access, in line with the UK's
framework and process for recognition of overseas firms and
funds.
