Today, the European Commission released its new draft regulation for money market funds (MMFs). The relevant texts can be found here. The regulation will be important for securitisation as it lists, inter alia, the assets that European MMFs are allowed to purchase. In the draft, these assets are limited to securitisations with less than 398 days to run and exclusively backed by corporate debt which, itself, has less than 398 days to run. This is a matter of some concern as this appears to define safe and high quality securitisation by reference to the underlying asset class (corporates). It is unclear what the rationale for this approach may be. It is also at variance with the other regulatory approaches to defining safe and high quality securitisations raising a very real risk of a total fragmentation of the market as it becomes impossible for any securitisation to meet every single differing regulatory scheme.
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