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US risk council votes to release money market funds proposal
November 13, 2012 / 8:10 PM / in 5 years

US risk council votes to release money market funds proposal

WASHINGTON, Nov 13 (Reuters) - The U.S. risk council voted on Tuesday to release a proposal for new rules for the $2.5 trillion money market fund industry, saying current regulations on the books are not enough to prevent runs in a time of crisis.

The Financial Stability Oversight Council’s proposal largely mirrors a plan that was championed this summer by Securities and Exchange Commission Chairman Mary Schapiro but failed to garner enough support from three of her colleagues.

The proposal by the FSOC, a council of regulators created by the 2010 Dodd-Frank law and chaired by Treasury Secretary Timothy Geithner, is an effort to pressure the SEC to come together and try to agree on a course of action.

Geithner said the recommendation consists of three main options. One would call for funds to hold a capital buffer of up to 1 percent of a fund’s value, and impose redemption holdbacks in times of stress.

Another would call for a move from a stable to a floating net asset value.

A third option would impose a higher buffer of 3 percent of a fund’s value, but funds could hold less capital if they met other requirements.

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