REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the adequacy of Regulation (EU) 2017/1131 of the European Parliament and of the Council on money market funds from a prudential and economic point of view
Date: 2026-05-11
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: banking system, financial instrument, financial legislation, financial supervision, financing method, investment company, money market, short-term financing

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 11.5.2026  COM(2026) 350 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the adequacy of Regulation (EU) 2017/1131 of the European Parliament and of the Council on money market funds from a prudential and economic point of view              
 
 
EXECUTIVE SUMMARY 

The Money Market Funds Regulation (the MMF Regulation) entered into force in 2018 and set out a 
comprehensive  framework  for  EU  money  market  funds  (MMFs).  It  recognises  their  major  role  in 
financing  the  economy,  in  particular  short-term  funding  to  public  authorities  and  corporates,  and 
meeting investors’ need. EU MMFs offer a liquid, well-regulated investment tool that contributes to 
meeting the objectives of the Savings and Investments Union.  

The MMF Regulation includes safeguards that aim to strengthen MMF resilience, which is essential for 
investors’  trust  in  the  product.  The  Commission’s  2023  MMF  Report1  found  that  the  framework  is 
broadly effective in reducing liquidity risks and identified certain aspect of the liquidity risks requiring 
further assessment. This report presents the results of the complementary analytical work carried out on 
liquidity risks, and the conclusions on better MMF resilience. 

MMFs are diverse and experience varying levels of liquidity shocks based on their type (variable, low 
volatility or constant net asset value – VNAVs, LVNAVs and CNAVs, respectively), currency, investors 
and  uses.  Due  to  these  differences,  MMFs  keep  liquidity  reserves  above  the  required  minima, 
considering  the  specific  characteristics  of  each  fund  and  their  stress  test  outcomes.  This  cautious 
approach by MMF managers can be explained by investor scrutiny (enabled by transparency rules in the 
MMF Regulation), regulatory supervision and concern over reputational risks. 

MMFs have demonstrated their capacity to reconstitute liquidity buffers even during periods of market 
stress, reflecting active liquidity risk management and effective supervisory oversight. This suggests 
that the different mechanisms set out in the MMF Regulation have been implemented consistently, under 
the coordination of the European Securities and Markets Authority (ESMA). 

This report has assessed the resilience of weekly liquid assets (WLAs), which is considered a useful 
WLA benchmarks for liquidity risk management and supervision. Based on extensive data analysis, this 
report concludes that the appropriate WLA benchmark levels (‘market resilience levels’) are 20% for 
VNAV MMFs and 40% for CNAV and LVNAV MMFs.  

The Commission therefore believes that these  market  resilience  levels may serve as  benchmarks for 
MMF  managers,  in  particular  in  risk  management  roles,  and  national  competent  authorities,  to  help 
identify situations that may warrant closer monitoring and increased supervisory engagement.   

1 Report from the Commission to the European Parliament and the Council on the adequacy of Regulation (EU) 
2017/1131 of the European Parliament and of the Council on money market funds from a prudential and economic 
point of view (COM(2023) 452): EUR-Lex - 52023DC0452 - EN - EUR-Lex  

1 

 
 
 
 
 
Contents 

EXECUTIVE SUMMARY ................................................................................................................... 1 

ABBREVIATIONS ............................................................................................................................... 3 

1 

INTRODUCTION ......................................................................................................................... 4 

2  ASSESSMENT OF MMFs LIQUIDITY MANAGEMENT ...................................................... 5 

2.1  Liquidity buffer levels .................................................................................................................. 5 

2.2  How MMFs meet redemption requests ...................................................................................... 9 

3  ASSESSMENT OF APPROPRIATE MMF MARKET RESILIENCE LEVELS ................ 11 

4  CONCLUSION ............................................................................................................................ 12 

5  ANNEX I: LIQUIDITY BUFFERS LEVELS .......................................................................... 13 

5.1  Statistics on liquidity buffer levels ............................................................................................ 13 

5.2  Examples of MMFs that experience high redemption shocks .................................................. 13 

6  ANNEX II: BEHAVIOUR OF REDEMPTIONS IN STRESSED MARKET CONDITIONS

15 

6.1  The market stress at the start of the COVID-19 pandemic ....................................................... 15 

6.1.1  Overall market impact .......................................................................................... 15 

6.1.2  Uneven effects and reactions across MMFs ......................................................... 15 

6.2  The LDI related market event .................................................................................................... 16 

7  ANNEX III: MARKET RESILIENCE LEVELS ..................................................................... 19 

7.1  Calibration of redemption shocks ............................................................................................. 19 

7.2  Calibration of the ‘market resilience thresholds’ ...................................................................... 19 

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ABBREVIATIONS  

AIFMD  

Alternative Investment Fund Managers Directive 

CNAV MMF 

Public debt constant net asset value MMF, as defined in Article 2(11) of the MMF 
Regulation 

DLA 

ECB  

ESMA 

ESRB 

EUR 

FSB 

GBP 

LMT 

Daily  liquid  assets,  in  accordance  with  the  requirements  set  out  in  Article 
24(1)(c), (d) and Article 25(1)(c) of the MMF Regulation  

European Central Bank 

European Securities and Markets Authority 

European Systemic Risk Board 

Euro 

Financial Stability Board 

UK sterling 

Liquidity management tool 

LVNAV MMF 

Low  volatility  net  asset  value  MMF,  as  defined  in  Article  2(12)  of  the  MMF 
Regulation 

LRM 

MMF 

Liquidity risk management 

Money market fund. MMFs refer to EU-domiciled funds unless stated otherwise 
(e.g. US MMFs). 

MMF manager 

Manager of the MMF, as defined in Article 2(23) of the MMF Regulation 

MMF Regulation 

Regulation (EU) 2017/1131 on money market funds  

NAV 

NCAs 

SIU 

USD  

UCITS 

Net Asset Value 

National  competent authorities, being the  competent authority of the MMF, as 
defined in Article 2(17) of the MMF Regulation 

Savings  and  Investments  Union,  a  European  Commission  initiative  aiming  to 
create better financial opportunities for people in the EU, while strengthening the 
financial system’s capability to connect savings with productive investments 

US dollar 

Undertakings for Collective Investments in Transferable Securities 

VNAV MMF 

Variable net asset value MMF, as defined in Article 2(13) of the MMF Regulation 

WAL 

WAM 

WLA 

Weighted average life, as defined in Article 2(20) of the MMF Regulation  

Weighted average maturity, as defined in Article 2(19) of the MMF Regulation  

Weekly  liquid  assets,  in  accordance  with  the  requirements  set  out  in  Article 
24(1)(e), (f) and Article 25(1)(d) of the MMF Regulation 

2023 MMF Report  Report from the Commission to the European Parliament and the Council on the 
adequacy of Regulation (EU) 2017/1131 of the European Parliament and of the 
Council on money market funds from a prudential and economic point of view 
(COM(2023) 452) 

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1 

INTRODUCTION  

MMFs  play  a  key  role  in  the  financial  system  as  cash  management  tools  for  corporates  and  an 
opportunity for investors looking for low volatility investment with higher returns than bank deposits. 
The  increase  in  EU  MMF  assets  in  the  last  five  years  (+45%  from  2019  to  2024)  demonstrates  the 
success of the framework. In the EU, 455 MMFs held about EUR 1.95 trillion in total assets at the end 
of 2024. EU MMFs are mainly established in Ireland, Luxembourg and France. As a result, EU MMFs 
offer  a  regulated  investment  tool  that  contributes  to  diversify  investment  opportunities  and  risk 
management, in line with the objectives of the Savings and Investments Union (SIU). They also provide 
additional funding options for EU businesses, enabling them to grow, innovate and create jobs.  

EU MMFs at a glance

-Denominated in EUR (~45%), USD (~32%) and GBP (~23%).
-Established in Ireland (44%), Luxembourg (30%) and France (24%).
-Owned by professional investors (90%), including non-EU investors for 
MMFs domiciled in Ireland (77%) and in Luxembourg (63%). 
-LVNAVs (~46%), VNAVs (~43%) and CNAVs (~11% of NAV).

Source: ESMA, 2023 EU MMF market, and Q4 2024 data 

In  2018,  the  MMF  Regulation  came  into  force  and  laid  down  a  comprehensive  regulatory  and 
supervisory  framework  for  EU  MMFs  that  “provide  short-term  finance  to  financial  institutions, 
corporations and governments [and] contribute to the financing of the economy of the Union” (recital 
1 of the MMF Regulation).  

The AIFMD and UCITS Directive have been revised to introduce a strengthened and more harmonised 
framework for liquidity risk management, notably through the requirement for managers to select and 
implement at least one liquidity management tool from a prescribed list. Applicable from 16 April 2026, 
this framework enhances consistency across funds and reinforces overall financial stability. 

The  MMF  Regulation  provides  a  harmonised  framework  to  strengthen  the  sector’s  resilience  and 
mitigate  systemic  risk,  with  provisions  covering,  among  other  things,  eligible  assets,  portfolio 
composition,  valuation,  risk  management,  leverage  prohibition,  transparency  and  reporting.  The 
portfolio composition requirements are a central pillar of the MMF Regulation. These include provisions 
aiming to ensure MMFs’ liquidity, such as provisions on liquidity buffers and provisions describing the 
role  and  duties  of  the  MMF  manager  (such  as  maturity  limits  and  credit  quality,2  see  below).  The 
different types of EU MMFs and their key characteristics and regulatory requirements are set out in 
Table 1. It shows the minimum regulatory thresholds for daily and weekly liquid assets (DLA and WLA) 
that MMFs must hold. The minimum thresholds in the MMF Regulation are intended to ensure, together 
with other safeguards, that MMFs can meet investor redemptions over time.  

2 MMF managers are responsible for ensuring compliance with the MMF Regulation. They have specific duties, 
such  as  assessing  the  credit  quality  of  MMFs  assets  and  conducting  stress  tests,  asset  valuation  and  investor 
disclosure. 

4 

 
 
 
 
 
 
 
Table 1: Key requirements and characteristics of EU MMFs  

Short-term MMF 

Standard MMF 

Stable NAV 

Variable NAV (VNAV) 

Requirements 

CNAV 

LVNAV 

Short-term 
VNAV 

WAM 

WAL  

Maturity of 
assets 

DLA 

WLA 

Max. 60 days 

Max. 120 days 

Max. 397 days  

Min. 10% 

Min. 30%  
(incl. up to 17.5% in public debt 
maturing within 190 days) 

Standard VNAV 

Max. 6 months 

Max. 12 Months 

Max. 2 years with a 397-day 
reset 

Min. 7,5% 

Min. 15% 

Other  

No leverage, diversification, credit quality requirements, transparency and reporting 

In  2023,  the  Commission  published  a  report3  (the  2023  MMF  Report)  showing  that  “the  MMF 
Regulation successfully passed the test of liquidity stress experienced by MMFs during the COVID-19 
related market turmoil of March 2020, the recent interest rate increases, and related financial asset re-
pricing”.4 Although the report concluded that the framework has been broadly able to ensure the sector’s 
resilience, it highlighted certain aspects of liquidity risk management that needed further assessment to 
ensure that MMFs are resilient.   

As  a  follow-up  to  the  2023  MMF  Report,  this  report  assesses  the  functioning  of  MMFs  based  on 
extensive  analytical  work  and  draws  on  multiple  data  sources5  and  consultations6  to  examine  how 
liquidity  risks  are  managed.  It  assesses  how  MMFs  respond  to  liquidity  shocks  and  how  managers 
mitigate liquidity risk, particularly through liquidity buffers. 

This report presents key findings on the assessment of MMF liquidity management (Section 2) and an 
analysis  of  appropriate  market  resilience  levels  (Section  3).  The  annexes  provide  a  more  in-depth 
technical analysis of these topics.  

2  ASSESSMENT OF MMFs LIQUIDITY MANAGEMENT  

2.1  Liquidity buffer levels 

The  Commission  carried  out  an analysis  of  liquidity buffers at the  level  of the whole  sector (macro 
analysis)  and  at  the  level  of  individual  MMFs  (micro  levels)  to  understand  how  the  levels  are 
determined, and whether the market exhibits consistent behaviour. 

3 Commission adopts report on the functioning of the Money Market Funds Regulation (MMF) - Finance 
4 2023 MMF Report, page 21.  
5 Data has been obtained from the following sources: Crane Data, Morningstar, ESMA, and NCAs. 
6 Commission targeted consultation on the functioning of the Money Market Fund Regulation, 12 April 2022, and 
Commission targeted consultation assessing the adequacy of the macroprudential policies for non-bank financial 
intermediation (NBFI), 22 May 2024.  

5 

 
 
 
 
 
 
Key finding 1: Most EU MMFs hold liquidity buffers well above the minimum requirements set 
out in the MMF Regulation 

MMFs adopt a wide range of liquidity buffer levels linked to their specific situations, in particular their 
propensity to incur redemption requests of variable size depending on their investor base. Between Q1 
2020 and Q4 2025, VNAV MMFs hold an average of at least 19% in DLA and 29% in WLA, compared 
with regulatory minima of 7.5% and 15% respectively, while CNAV and LVNAV MMFs maintain even 
higher  buffers,  averaging  36%  in  DLA  and  54%  in  WLA,  compared  with  minimum  regulatory 
thresholds of 10% and 30% respectively. 

Table 2 sets out the distribution of DLA and WLA by type of MMF over a six-year period. For instance, 
as  regards  WLA  distribution  for  LVNAVs,  the  average  buffer  was  50%,  whereas  LVNAVs  had  an 
average  buffer  below  43%  for  the  25th  percentile  and  had  an  average  buffer  of  54%  for  the  75th 
percentile. This data shows that the vast majority of LVNAV MMFs (75%) had average WLA above 
43%. Similar findings can be observed for the other categories of MMFs and for their respective DLA.    

Table 2: Distribution of DLA and WLA by MMF type over a six-year period (in % of MMF NAV) 

MMF Type 

CNAV 

LVNAV 

Short-term VNAV 

Standard VNAV 

25th percentile 

DLA 

Average 

WLA 

75th percentile 

25th percentile 

Average 

75th percentile 

24% 

40% 

53% 

41% 

59% 

76% 

25% 

33% 

38% 

43% 

50% 

54% 

11% 

22% 

28% 

22% 

35% 

43% 

Sources: European Commission based on ESMA data from Q1 2020 to Q4 2025 

8% 

15% 

18% 

16% 

24% 

28% 

The fact that most EU MMFs hold liquidity buffers well above the minimum requirements set out in the 
MMF  Regulation  is  explained  by  the  generally  prudent  approach  adopted  by  EU  MMFs,  driven  by 
strong supervision, investor scrutiny (facilitated by the MMF Regulation’s transparency requirements) 
and heightened sensitivity to reputational risks. This behaviour remains relatively stable over time, with 
some variations (see Chart 1 on LVNAV and Annex I). Chart 1 shows that the lowest level observed 
between 2020 and 2025 was an average liquidity buffer of 45% with the 25th percentile never falling 
below an average of 40% (Q2 2025).   

6 

 
 
 
 
 
 
Chart 1: Trends in the distribution of WLA for LVNAV MMFs 

Source: European Commission, based on ESMA data from Q1 2020 to Q4 2025 
Note: Trends in the average WLA and 25th and 75th percentiles of WLA (as a percentage of the NAV) across 
LVNAV. 

Similar patterns are observed for other quantitative requirements under the MMF  Regulation, which 
indicates a prudent approach across the MMFs sector. For example, WAL levels remained well below 
the applicable regulatory maxima. For CNAV, LVNAV and short-term VNAV MMFs, average mean 
and  median  WAL  levels  generally  ranged  between  40  and  65  days,  compared  with  a  regulatory 
maximum of 120 days. This indicates that asset maturities are, on average, shorter than the regulatory 
limit  by  a  factor  or  two  to  three,  enabling  faster  reimbursement  and  contributing  to  the 
replenishment of liquidity buffers. Standard VNAV MMFs exhibited higher WAL levels, with mean 
and median levels around 110–125 days, well below the regulatory ceiling of 360 days.7 

Key finding 2: MMFs hold different levels of liquidity buffers due to their differing characteristics 
due to varying degrees of potential liquidity shocks  

MMFs  generally  operate with  buffers above the regulatory minima although these  can  vary.  This is 
because  MMFs  have  differing  characteristics,  including  category  (VNAV,  LVNAV  or  CNAV), 
currency  denomination,  investor  base  composition  and  use  cases  (see  Annex  II).  They  are  therefore 
subject to varying degrees of potential liquidity shocks. Even MMFs of a similar type and currency do 
not have the same vulnerability to liquidity shocks.  

In this regard, on average, MMFs experienced redemption shocks during the COVID-19 market event 
(see  Chart  2)  manageable  by  their  liquidity  buffers.  Chart  2  shows  that,  over  one  month,  VNAV 
MMFs experienced withdrawals of around 13%, compared with a minimum weekly liquidity buffer of 
15%.  LVNAV  MMFs  recorded  outflows  of  about  12%,  rising  to  27%  for  USD-denominated  funds, 
against a weekly liquidity buffer of 30%. By contrast, CNAV MMFs saw significant inflows during the 
initial phase of the COVID-19 pandemic. 

7 ESMA report on MMF (2023) and Crane Data 

7 

 
 
 
 
 
 
 
 
Chart 2: Net cumulative flows in MMFs at the onset of the COVID-19 market event 

Sources:  ESRB report, July 2021, Issues note on systemic vulnerabilities of and preliminary policy considerations to reform 
money market funds 
Note:  Net  cumulative  daily  flows  of  broken  down  by  MMF  type  and  expressed  in  billions  euros  (y-axis).  Positive  values 
indicate net subscriptions, while negative values indicate net redemptions. The percentages show fund flows relative to the net 
asset value of each fund type. 
As  regards  USD  LVNAV  MMFs,  they  did  experience  a  significant  redemption  shock  during  the 
COVID-19 market event. However, the impact was extremely uneven across that MMF cohort, with 6% 
experiencing cumulative net outflows exceeding 30%, while 10% did not experience any redemption. 
Between these two extremes, various intermediate levels of inflows or outflows were observed, as shown 
in  Chart  3.  The  lines  represent  the  cumulative  net  flows  of  individual  USD  LVNAV  MMFs  over 
approximately five weeks of the COVID-19 market event. 

Chart 3: Cumulative flows of individual USD LVNAV MMFs during the COVID-19 market event 

Sources: Crane Data and NCAs. 
Note: Each line represents the net cumulative flows as a percentage of NAV (y-axis) of a USD LVNAV MMFs with a NAV 
superior to EUR 1 billion. Positive values indicate net subscriptions, while negative values indicate net redemptions. These 
examples show that while USD LVNAV MMFs experienced significant redemptions during the COVID-19 market event, the 
impact on them was uneven across that MMF type. 

8 

 
 
  
 
 
 
2.2  How MMFs meet redemption requests 

Stressed  market  conditions,  for  example  during  the  COVID-19  and  the  liability-driven  (LDI)  funds 
market events, provide valuable insights into the dynamics of liquidity management in such conditions. 
The Commission analysed the capacity of MMFs to replenish liquidity buffers, including  in stressed 
market conditions. Building on extensive datasets, this analysis focused on two levels: (1) the overall 
market; and (2) a closer review of MMFs that faced the most severe liquidity shocks.  

Key finding 3: MMFs are able to refill their liquidity buffers under strong redemption pressure, 
including in stressed market conditions 

In normal market conditions, MMFs typically maintain and refill their liquidity buffers through 
‘mechanical  operations’.  This  is  achieved  not  only  through  revolving  cycles  of  roll-down  of  high 
quality  short-term  maturing  assets  (CP/CD/T-bills8),  reinvestment  of  the  cash  into  new  short-term 
maturing assets, but also through transactions on the secondary market and the use of overnight secured 
funding (e.g., reverse repo) that can be sized up or down daily. This process is regulated and supervised 
on the basis of tight maturity requirements in the MMF Regulation, in particular the WAL which limits 
the average maturity of MMFs assets overall, and limits maturity for each asset individually (see Table 
1).  

In stressed market conditions, MMFs “refill” moves from mechanical to ‘defensive operations’. 
As  redemptions  accelerate  and  secondary-market  liquidity  deteriorates,  MMF  managers  actively 
accelerate cash generation by liquidating holdings and reduce exposure to market prices (see Chart 4). 
To achieve this, they adjust the portfolio composition to reduce the WAM (sensitivity to market price) 
and WAL (average maturity)9 by concentrating reinvestments in the most liquid bonds with the shortest 
duration. This enables MMFs to increase the pace at which liquidity buffers are restored. Chart 3 shows 
the development of MMFs’ bond portfolios before and at the start of the COVID-19 pandemic. It shows 
that, across the sector, the proportion of bonds with shorter maturity (3-6 months) in the portfolio almost 
doubled between December 2019 to June 2020.   

Chart 4: MMFs debt composition development   

  Chart 5: Trade-off between WLA and NAV 

deviation 

Source:  EFAMA,  European  MMFs  in  the  Covid-19  market 
turmoilovid-19, November 2020 
Note:  Maturity  breakdown  of  debts  in  MMF  portfolio, 
expressed as a percentage of total MMF assets 

Source:  ESMA  report,  Vulnerabilities  in  money 
market funds, 2021 
Note: 7-day net flows, WLA as a percentage of NAV 
and NAV deviation (in basis points), as of 25 March 
2020 

8 MMFs invest in short-term instruments like commercial paper (CP), certificates of deposit (CDs), and Treasury 
bills (T-bills) to provide investors with low-risk, liquid returns. 
9  Market  risk  is  proportionate  to  the  duration  of  bonds.  By  shortening  the  maturity  of  bonds  held  by  MMF 
portfolios, these portfolios are less exposed to market risk when converting bonds to cash into a shorter timeframe.   
9 

 
 
 
 
 
 
 
 
At  the  level  of  individual  MMFs,  an  analysis  of  funds  that  experienced  large  redemption  requests 
showed a similar pattern: these funds prioritised maintaining liquidity and, after drawing down their 
liquidity buffers, were able to rebuild them quickly (see Chart 6 for illustration and Annex I). Overall, 
redemption shocks experienced by individual MMFs were smaller than the amount of liquidity buffers 
maintained,  enabling  funds  to  meet  redemption  requests  swiftly.  Chart  6  shows  the  example  of  one 
LVNAV MMF that experienced an extreme redemption scenario and how it maintained weekly liquidity 
buffers above the regulatory minima over the reference period. Despite a 45% outflow during the period, 
WLA did not go below 30%.10  

It  should  be  noted  that  LVNAV  MMFs  have  kept  their  WLA  buffers  either  through  portfolio 
amortisation  or  assets  sales,  in  a  context  of  wider  bid-ask  spreads.  This  may  have  triggered  NAV 
deviations, particularly where less liquid assets such as CP and CDs were sold. These NAV deviations 
are illustrated in Chart 5. Maintaining WLA buffers may therefore have required the sale of less liquid 
assets, contributing to NAV deviations. 

Chart 6: Example of worst-case scenario of a LVNAV MMF under strong liquidity shock 

Minimum WLA 

Sources: Crane Data and NCAs.  
Note: Example of a LVNAV MMF experiencing very significant outflows, illustrating the impact on WLA and the subsequent 
rebuilding of liquidity. See other examples in Annex I. 

10 It should be noted that central bank intervention in commercial paper markets also supported the sector, helping 
to prevent further repercussions for MMFs under pressure. 
10 

 
 
 
 
 
 
 
 
3  ASSESSMENT OF APPROPRIATE MMF MARKET RESILIENCE LEVELS 

This  section  examines  the  resilience  of  the  EU  MMF  sector  to  significant  increases  in  redemption 
requests.  As  discussed  in  the  previous  sections,  liquidity  buffers  play  a  crucial  role  in  meeting 
redemption requests, particularly in periods when short-term markets may be illiquid. To conduct this 
analysis, the  Commission  calculated the minimum level of WLA (‘WLA resilience level’) which, if 
maintained by MMFs, would allow them to serve strong redemption requests, while keeping DLA above 
the regulatory minimum.  

The methodology is summarised below and corresponding data is presented in Annex III. 

Key steps of the methodology used to calibrate the WLA resilience level 

1) Calibration of 
severe but plausible 
redemption scenarios
• 1st percentile of 
returns, calibrated on 
COVID-19 market stress

2) Estimate, for 
different level of 
WLAs, how much 
redemption MMFs 
can absorb
• Under conservative 
assumptions (e.g. no 
asset sales, DLA 
remains above its 
regulatory limit)

Calibrate the WLA 
resilience levels:  Min 
level of WLA (2) that 
allow MMFs to 
withstand the 
liquidity shock (1)

Key finding 4: To withstand stressed market conditions, WLA resilience levels of 40% for stable 
NAV MMFs and 20% for VNAV MMFs are generally sufficient. 

This analysis shows that WLA resilience levels of 40% for stable NAV MMFs and 20% for VNAV 
MMFs are generally sufficient to withstand stressed market conditions (see also Annex III). More 
specifically,  holding WLAs  at  or  above  these  resilience  levels  would  allow  EU MMFs to  withstand 
severe redemption shocks without fire asset sales while still maintaining DLAs above the regulatory 
minima.  Maintaining  DLAs  above  the  minimum  helps  ensure  immediate  liquidity  for  redemptions, 
especially in periods of stress when MMFs may experience redemptions over several consecutive days. 

This  means  that,  from  a  market-wide  perspective,  applying  these  resilience  levels  uniformly  will 
strengthen  the  ability  of  EU  MMFs  to  withstand  stressed  market  conditions  and  to  mitigate  the 
propagation of shocks to the rest of the financial system and the economy.   

The Commission therefore believes that these WLA resilience levels could serve as practical reference 
points for liquidity risk management. From a supervisory perspective, they could also function as early 
warning indicators, prompting closer monitoring or enhanced supervisory engagement by NCAs, when 
MMFs  operate  persistently  below  the  identified  resilience  levels.  Therefore,  these  WLA  resilience 
levels could be used to identify situations that warrant further attention from MMF managers, 
particularly their risk management teams, and enhanced supervisory engagement by the relevant 
NCAs with MMF managers.  

It  should  be  emphasized  that  many  MMFs  are  unlikely  to  experience  redemption  shocks  of  the 
magnitude  used  to  calibrate  the  WLA  resilience  levels.  As  this  report  shows,  MMFs  are  not 
homogeneous;  their  propensity  to  face  liquidity  shocks  depends  on  their  specific  characteristics  and 
investor base. In addition, the calibration of WLA resilience levels relies on conservative assumptions, 
particularly the assumption that DLA is not used once it reaches the regulatory minimum.  

11 

 
 
 
 
Therefore, setting the identified WLA resilience levels as new binding regulatory minima is not 
proportionate, given the heterogeneity in the MMF sector and fund types (Key finding 2). Instead, 
the  Commission  considers  that  these  WLA  resilience  levels  can  serve  as  supervisory  and  risk-
management benchmarks, supporting MMF managers and NCAs to identify situations that may require 
closer monitoring and enhanced supervisory engagement.  

4  CONCLUSION 

The findings of this report are intended to serve as a basis for improving liquidity management by MMF 
managers and supervision of MMFs by NCAs. The findings in section 2 show that sector-wide liquidity 
levels  are  diverse  although  generally  well  above  the  minimum  regulatory  thresholds  in  the  MMF 
Regulation. Moreover, the MMF sector overall has managed liquidity risks in a responsible manner, 
both on an ongoing basis and in times of stressed market conditions.  

The  findings  in  section  3  indicate  that  identified  WLA  resilience  levels  are  capable  of  serving  as 
supervisory and liquidity risk-management benchmarks, below which the intensity of scrutiny within 
the  risk  management  functions  of  MMFs  and  their  managers  should  be  usefully  increased  and  the 
supervisory scrutiny and engagements by NCAs enhanced, in order to ensure market wide resilience. 

12 

 
 
 
 
5  ANNEX I: LIQUIDITY BUFFERS LEVELS 

5.1  Statistics on liquidity buffer levels 

Chart I.1 presents statistics on liquidity buffer levels, illustrating that MMFs maintain liquidity above 
regulatory minima and how these levels change over time.  

Chart I.1: WLA and DLA levels 

Source: European Commission, based on ESMA data from Q1-2020 to Q4-2025  
Note: Trends in the average WLA and 25th and 75th percentiles of WLA (as a percentage of the NAV) across LVNAV.  

5.2  Examples of MMFs that experience high redemption shocks 

Liquidity buffer replenishment was analysed by focusing on the bottom 10% of funds that experienced 
the  largest  outflows.  The  analysis  drew  on  supervisory  data  from  NCAs,  other  data  sources,  fund 
communications on liquidity management under stressed market conditions, and changes in portfolio 
composition. A consistent pattern emerged: even among the most affected funds, MMFs were able to 
rebuild their liquidity buffers within a relatively short period following the stress episode. 

13 

 
 
 
 
 
 
 
 
 
Chart I.2: Examples of replenishment of liquidity buffers of two VNAVs under large redemption 
requests 

Sources: Crane Data and NCAs.   
Note: Example of two VNAVs MMF experiencing significant outflows, illustrating the impact on WLA and the subsequent rebuilding of 
liquidity buffers. The 15% minimum level is shown as a dashed line. .  

Chart I.3: Replenishment of liquidity buffers under large redemption requests 

Sources: Crane Data and NCAs.   
Note: Example of two LVNAV MMF experiencing significant outflows, illustrating the impact on WLA and the subsequent rebuilding of 
liquidity buffers. The 30% minimum level is shown as a dashed line. 

14 

 
 
 
 
 
 
 
 
 
 
 
 
6  ANNEX II: BEHAVIOUR OF REDEMPTIONS IN STRESSED MARKET CONDITIONS 

6.1  The market stress at the start of the COVID-19 pandemic 

6.1.1  Overall market impact  

The  market  events  brought  on  by  the  COVID-19-pandemic  began  to  unfold  in  February  2020  as 
concerns about the global spread of the virus intensified and financial markets started to reprice risk. 
However, its impact on MMFs materialised mainly in mid-March 2020 and continued until June 2020, 
when stressed market conditions were observed.  

During a  15-day period starting  in mid-March, investors in some MMFs increased their demand for 
liquidity,  in  particular  from  USD-denominated  LVNAV  MMFs,  which  experienced  substantial 
redemption pressures (around 18% and 30% of those market segments).  

USD-denominated LVNAV MMFs saw the largest and most prolonged outflows of all European short-
term MMFs in the early weeks of March 2020. This was because, in addition to redemptions linked to 
cash needs, investors shifted to public debt CNAV in the EU. 

Chart II.1: Cumulative MMFs flows in 2020 

Source: FSB, Policy proposals to enhance MMF resilience, October 2021 

6.1.2  Uneven effects and reactions across MMFs 

The size of redemption requests and investor behaviour in normal and stressed conditions varies greatly 
across MMFs. Reactions and behaviours are driven by different factors, mainly by the investor base and 
within the investor base and by the use case of their investments (see below), the size of key investors 
and the investor mix. Other determining factors are the type of MMF (VNAV, LVNAV, CNAV).  

While  fund  classification  and  currency  are  clearly  major  determinants,  even  very  similar  categories 
experienced highly diverse shocks during and beyond the COVID-19 crisis period. These differences 
are shown in Chart 3. 

Charts 2 and 3 illustrate that, overall, USD LVNAV MMFs experienced a significant redemption shock 
at the beginning of the COVID-19 pandemic. However, the impact was highly uneven across funds. 
Fewer than 6% of LVNAV MMFs experienced cumulative outflows exceeding 30% of their NAV. 

15 

 
 
 
 
One reason for this heterogeneity is the investors’ use cases. Three stylised ‘extreme’ examples illustrate 
how the same MMF can experience very different redemption patterns depending on the investor base 
and their behaviour in various market situations. 

1)  Use  of  MMFs  as  cash-management  /  “payments”  vehicle  (predictable  cycle):  Some 
institutional investors use VNAV MMFs as transactional cash buckets, e.g., cash is invested 
as  contributions/premiums  are  collected  and  then  redeemed  in  a  predictable  cadence  (for 
instance, around pension-payment cycles). In this situation, outflows are often scheduled and 
can be forecast, so any liquidity decrease is rather a planned fluctuation than a run. Similar 
examples are pension systems that have regular inflows (contributions) and periodical outflows 
(benefit payments), which create predictable cash-flow patterns.  

2)  Use of MMFs as a collateral / margin liquidity vehicle (potentially cliff-like pattern): When 
MMFs are  used  as  collateral liquidity  reserves  (directly  or  indirectly) for derivatives,  repo 
transactions or LDI-related margin needs, the redemption  driver can be market movements 
and related margin calls. In leveraged LDI funds, collateral needs can rise quickly when yields 
increase (reflecting marked-to-market losses), triggering a scramble for cash from many market 
players  at  once.  In  these  circumstances,  investors  may  redeem  MMF  shares/units  to  meet 
collateral  calls,  or  they  may  use  MMF  holdings  within  collateral-management  workflows—
creating more pro-cyclical and correlated liquidity demand than ‘pure’ cash-management 
usage.  

3)  Use of MMFs to pool the cash of other funds managed by the same MMF asset manager. 

Here the manager has visibility of redemption flows. 

6.2  The LDI related market event 

In  late  September  2022,  a  sharp  rise  in  UK  gilt  yields  and  severe  stress  in  liability-driven  (LDI) 
investment strategies used by pension funds were observed. This generated heavy mark-to-market losses 
for LDI funds which, in turn, induced variation margin calls. These margin calls created a sudden and 
important demand for cash, which spilled over to GBP-denominated MMFs, even though MMFs were 
not  the  source  of  the  sudden  extreme  liquidity  demand.  Some  MMFs  experienced  rapid  outflows, 
particularly from institutional investors, and responded by increasing liquidity buffers and shortening 
portfolio maturities.  

16 

 
 
 
 
Chart II.2: Impact of the LDI crisis on MMFs flows 

Sources: Crane Data and NCAs, MMFs with NAV superior to EUR 100 Mios 
Note: Net cumulative flows by type of MMFs, expressed as a percentage of NAV 

MMF  responses  to  the  sudden  investor  liquidity  demand  in  the  LDI  market  event  were  even  more 
pronounced  than  the  response  during  the  COVID-19  pandemic.  While  some  MMFs  experienced 
inflows, others faced strong redemption pressures at times. The LDI-related market event had a highly 
diverse impact on GBP-denominated LVNAV MMFs, affecting only a handful of funds rather than the 
whole sector.  

This diverse impact is reflected in the distribution of outflows: although the median fund experienced a 
–9%  weekly  outflow  (–10%  cumulatively),  the  lower  tail  faced  more  severe  stress,  with  the  10th 
percentile seeing –21% weekly outflows and the most affected 1% of funds losing nearly  –37% in a 
single week (–42% cumulatively). This pronounced skew indicates that stress was concentrated in funds 
heavily used by LDI strategies as liquidity buffers to meet margin and collateral calls. By contrast, GBP-
denominated LVNAVs that served broader cash-management purposes, with more diversified investor 
bases and less direct linkage to collateral transformation or gilt-repo activity, recorded inflows over the 
same period. 

17 

 
 
 
 
 
Chart II.3: Trends in NAV, GBP LVNAVs during the LDI related market event 

Sources: Crane Data and NCAs. 
Note: Each line represents the net cumulative flows as percentage of NAV (y-axis) of a GBP LVNAV with a NAV 
superior to EUR 1 billion. Positive values indicate net subscriptions, while negative values indicate net redemptions. 
Those examples show that while GBP LVNAV MMFs experienced significant redemptions during the  LDI crisis 
market event period, the impact was uneven across that MMF type. 

18 

 
 
 
 
 
 
 
 
7  ANNEX III: MARKET RESILIENCE LEVELS 

7.1  Calibration of redemption shocks 

In assessing redemption shocks, several models were tested using different data sources (Crane Data, 
NCAs, Morningstar) and methodological approaches, with a particular focus on addressing data quality 
issues and ensuring robustness.  

The first percentile of the redemptions (in % of the NAV) was ultimately selected as it captures severe 
but plausible stress conditions, while limiting the influence of potential data errors or outliers.  

This  percentile  is  calibrated  based  on  the  COVID-19  pandemic  related  market  event  and  therefore 
reflects a highly adverse scenario. It should be noted that such scenarios may not be realistic for many 
MMFs  that  benefit  from  a  predictable  investor  base.  Nevertheless,  this  severe  approach  is  deemed 
appropriate in the context of potential contagion risks, particularly reputational contagion. 

The relevance of contagion may also be assessed in the context of know-your-customer practices and 
the fact that MMFs are subject to regular regulatory disclosures to their investors. In addition, many 
investors require more frequent and detailed information, which may further mitigate contagion risks. 

Table III.1: Range of first percentile redemption scenario distribution, across data sources [min 
1st percentile, max 1st percentile] 

VNAV 

[-4% ;-8%] 

[-6% ;-19%] 

[-16% ;-45%] 

Daily 

Weekly 

Monthly 

-  Standard VNAV 

[-4% ;-8%] 

[-4% ;-21%] 

[-9% ;-45%] 

-  Short-term VNAV 

[-3% ;-10%] 

[-6% ;-15%] 

[-17% ;-26%] 

LVNAV 

[-6% ;-11%] 

[-7% ;-28%] 

[-28% ;-45%] 

-  LVNAV USD 

[-9% ;-12%] 

[-16% ;-26%] 

[-30% ;-44%] 

-  LVNAV GBP 

[-8% ;-11%] 

[-16% ;-30%] 

[-26% ;-47%] 

CNAV 

Global 

[-5% ;-14%] 

[-4% ;-22%] 

[--1% ;-34%] 

[-6% ;-11%] 

[-7% ;-26%] 

[-21% ;-45%] 

Sources: Crane Data, Morningstar, NCAs data 

7.2  Calibration of the ‘market resilience thresholds’  

EU MMFs are generally able to withstand the redemption shocks identified in Section 7.1, reflecting the 
dispersion  of  WLA  levels  across  the  sector.  However,  it  is  still  crucial  that  robust  supervision  and 
effective risk management systems are in place to ensure that liquidity levels are tailored to each fund’s 
specific situation.  

In  this  context,  this  section  calibrates  WLA  resilience  levels  that,  if  applied  uniformly  as  minimum 
benchmarks, would enable MMFs to withstand the redemption scenarios calibrated in Section 7.1.  

19 

 
 
  
 
 
The methodology set out below has been used:  

1.  The  analysis  estimates  the  volume  of  redemptions  that  MMFs  can  absorb  before  their  daily 
liquid assets fall below the regulatory minimum level. To do this, different levels of minimum 
WLA are considered, using real data on the portfolio composition and amortisation. 

2.  To  calibrate  the  WLA  resilience  thresholds,  the  results  are  compared  with  the  redemption 
scenarios applied to the MMFs identified in Section 7.1 (see Table  III.1). The analysis takes 
into  account  the  portfolio  amortisation.  The  following  conservative  set  of  assumptions  is 
applied: 

- 

redemptions are met exclusively through existing DLA and WLA, with no asset sales 
apart from the ones qualifying for the DLA and WLA;  

- 

the DLA is maintained above the minimum regulatory requirements11. 

Table III.2: Scenario retained for the calibration exercise: 

MMF type 

Daily 

Weekly 

Monthly 

Standard VNAV 

-8% 

-17% 

-34% 

Stable NAV 

-15% 

-30% 

-47% 

Sources: Crane Data, Morningstar, NCAs data 

This analysis shows that WLA resilience levels of between 35% to 40% for stable NAV MMFs 
and 20% for VNAV MMFs are sufficient to withstand stressed market conditions. In particular, 
holding WLAs at or above these resilience level would enable EU MMFs to withstand (i.e. to maintain 
DLAs above the regulatory minima) severe redemption shocks as calibrated in section 7.1. 

11 This is a conservative hypothesis, as in practice, MMFs may allow DLA to temporarily fall below the regulatory 
minimum to meet redemption requests, and may also sell assets or rely on cash inflows. 

20