MEPs ditch capital buffer rules for money market funds

Europe’s money market funds will not have to hold costly capital to shield them from financial shocks following a vote by MEPs to soften proposed new rules for the trillion-euro industry.

The new regulations are designed to ensure stability in money market funds, which are used by companies and investors to park cash for short periods. The funds experienced mass withdrawals when US bank Lehman Brothers collapsed in 2008.

The original proposals would have required more than half the funds in the sector to hold a buffer or capital equivalent to 3% of their assets as a safeguard in market turbulence.