Research Handbook on Shadow Banking
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Research Handbook on Shadow Banking

Legal and Regulatory Aspects

Edited by Iris H.-Y. Chiu and Iain G. MacNeil

Research Handbook on Shadow Banking brings together a range of international experts to discuss shadow banking activities, the purposes they serve, the risks they pose to the financial system and implications for regulators and the regulatory perimeter. Including discussions specific to the UK, European Union, US, China and Singapore, this book offers high level and theoretical perspectives on shadow banking and regulatory risks, as well as more detailed explorations of specific markets in shadow banking.
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Chapter 12: European money market fund regulations and universal transparency

Joseph Tanega and Viktoria Baklanova

Abstract

Money market funds since the financial crisis of 2008–09 have been the focus of heated debate and, with the introduction of the proposed European regulation on 4 September 2013, more controversy ensued. By the summer of 2017, a political agreement has been reached regarding the new regulation. We do not consider what specific details should be incorporated; our focus is merely to present the diverse European money market fund industry and to recommend the adoption of the Office of Financial Research’s (OFR’s) monitoring system for the promotion of transparency in the money market funds system. The fragmentation of the industry has been viewed as not only a source of confusion for investors, but also as a significant challenge in fostering a single market for financial services. We contend that the European money market fund industry rests on the outcomes of two divergent trends: further harmonization of investment products toward the convergence of investment and regulatory practices, and a desire for product differentiation. These two trends underscore two different types of transformations related to the development of money market funds in Europe: (1) from the very market practices that exist de facto to their capture and replication de jure; and (2) from the de jure ideals of fair rules that encourage further and deeper de facto market developments.

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