ANNEX

SPECIFICATION OF COMPLIANCE CRITERIA APPLICABLE TO THE RECOMMENDATION

Recommendation A – Reducing threshold effects

The following compliance criterion is applicable to sub-Recommendation A(2).

The current reference in Article 34(1)(a) of Regulation (EU) 2017/1131 of the European Parliament and of the Council (1) (hereinafter the ‘MMFR’) to the proportion of weekly maturing assets falling below 30 % of the total assets of the money market fund (MMF) and the net daily redemptions on a single working day exceeding 10 % of the total assets and the reference in Article 34(1)(b) to the proportion of weekly maturing assets falling below 10 % of the total assets should be repealed.

Recommendation B — Reducing liquidity transformation

The following compliance criteria are applicable to sub-Recommendation B(1).

New liquidity requirements for variable net asset value (VNAV) and low-volatility net asset value (LVNAV) MMFs should ensure that:

— the depth of liquidity in the portfolios of private debt-focused MMFs is enhanced;

— further reassurance to investors is provided and hence run risk is reduced;

— MMFs have enough liquidity to meet heightened redemptions demands during periods of market stress without involving spill-over effects to other parts of the financial system; and

— MMFs hold a portion of their liquid assets in public debt assets issued by a diversified set of bodies, where possible in the main investment currency of that fund, in order to contribute to greater diversification and stability in the net asset value (NAV) of private debt MMFs.

In respect of LVNAV MMFs in particular, Article 24(1)(g) of the MMFR should be repealed to align the eligibility of assets for the weekly maturing assets, daily maturing assets and public debt assets with those of VNAVs.

The new liquidity requirements for short-term VNAV MMFs should at least be equal to 20 % of their assets and be split between:

— at least 15 % of weekly maturing assets, including at least 10 % of daily maturing assets; and

— at least 5 % of additional public debt assets.

The new liquidity requirements for standard VNAV MMFs should at least be equal to 25 % and be split between:

— at least 15 % of weekly maturing assets, including at least 10 % of daily maturing assets; and

— at least 10 % of additional public debt assets.

The new liquidity requirements for LVNAV MMFs should at least be equal to 45 % and be split between:

— at least 30 % of weekly maturing assets, including at least 15 % of daily maturing assets; and

— at least 15 % of additional public debt assets.

Where public debt assets are not sufficiently available in the currency of the fund, MMFs should, provided that they inform their national competent authorities (NCAs) immediately, be allowed to meet their public debt liquidity requirements through:

— deposits with credit institutions that can be withdrawn at any time upon giving prior notice of no more than one working day, without prejudice to the diversification requirements set out in Article 17(1)(b) of the MMFR; and

— reverse repurchase agreements secured with public debt assets and which are able to be terminated at any time upon giving prior notice of no more than one working day.

The following compliance criteria are applicable to sub-Recommendation B(3).

The Commission’s proposed changes to the relevant Union legislation should ensure that NCAs’ decisions are applicable to subsets of MMFs according to their type and currency or to all MMFs under their supervision.

The following compliance criteria are applicable to sub-Recommendation B(4).

The Commission’s proposed changes to the relevant Union legislation should provide for the European Securities and Markets Authority (ESMA) to coordinate NCAs’ decisions as referred to in sub-Recommendation B(3) with regard to:

— subsets of MMFs located in several Member States, according to their type and currency of denomination; and

— the time limit by which MMFs that benefit or may benefit from decisions as referred to in sub-Recommendation B(3) should correct their situation.

Recommendation C — Imposing on redeeming investors the cost of their redemptions

The following compliance criteria are applicable to sub-Recommendation C(2).

The Commission should ensure that relevant Union legislation mandates ESMA to develop specific criteria and guidance defining the circumstances in which liquidity management tools, including but not restricted to those referred to in sub-Recommendation C(1), redemption gates and suspensions, should be deployed. The choice of the tool, the activation of the tool and the calibration of its deployment should be decided upon by the individual MMF manager, subject to the criteria to be developed. Where quantitative parameters are considered, threshold effects should not be introduced.

Recommendation D — Enhancing monitoring and stress testing

The following compliance criterion is applicable to sub-Recommendation D(1).

The Commission’s proposed changes to the relevant Union legislation should increase the frequency of the reporting by MMF managers to their respective competent authority, as referred to in Article 37 of the MMFR, to a monthly frequency at least for the main indicators and parameters used for supervisory purposes. MMFs whose assets under management in total do not exceed EUR 100 million should report on a quarterly basis at least.

In addition, the data should include information on the percentage of NAV categorised both by the type of investor and their place of domicile. An investor’s sector breakdown should at least include the following sectors:

— non-financial corporations, specifying their economic activity, for example according to the Statistical Classification of Economic Activities in the European Community (NACE);

— credit institutions;

— insurers;

— pension funds;

— governments;

— MMFs;

— non-MMF investment funds;

— other financial institutions;

— households;

— others.

The following compliance criteria are applicable to sub-Recommendation D(2).

ESMA should be empowered to design templates for ad hoc data requests made by NCAs as provided for in Article 39 of the MMFR. These templates should at least include the following data:

— NAV per share/unit and, in the case of PDCNAV MMFs, the variable NAV per share;

— total assets;

— weighted average maturity as defined in point (19) of Article 2 of the MMFR;

— weighted average life as defined in point (20) of Article 2 of the MMFR;

— inflows and outflows;

— public debt assets;

— weekly maturing assets;

— daily maturing assets;

— cash balances.

The following compliance criterion is applicable to sub-Recommendation D(4).

The Commission’s proposed changes to the relevant Union legislation should be without prejudice to the provisions of Article 28 of the MMFR regulating stress test carried out by individual MMFs.

The adequate Union-wide stress testing regime for MMFs should be based on a common severe but plausible scenario and offer the possibility to conduct reverse stress tests to identify the point (in terms of redemptions, shocks to credit, liquidity, or interest rate risk) past which MMFs would not be able to operate in an orderly manner.

(1) Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds (OJ L 169, 30.6.2017, p. 8).