The Financial Conduct Authority on Monday said it plans to issue new rules and guidance for UK money market funds, after the government confirmed on 15 May that it will replace the UK Money Market Funds Regulation with a new framework built mainly around FCA rules.
The FCA said it will retain the current minimum daily liquid asset requirements in its rules. Weekly liquid asset minimums will also remain at current statutory levels, but the FCA will publish guidance setting a “strong supervisory expectation” that stable NAV MMFs hold 40% WLA and variable NAV MMFs hold 20%.
The approach is softer than the FCA’s 2023 consultation, CP23/28, which had proposed raising minimum DLA and WLA levels to 15% and 50%, respectively.
The FCA said updated analysis, drawing on the Bank of England’s system-wide exploratory scenario exercise, indicated that outflows may be lower in some stress scenarios than previously assumed, reflecting changes in market structure and firms’ improved access to alternative liquidity channels.
The FCA said it still plans to carry over most other measures from CP23/28, including delinking and enhanced KYC requirements on investor concentration and correlated withdrawal risk.
The government expects repeal legislation to be introduced by the end of 2026. The FCA said it plans to align its new rules to the same timetable.
