[PPT] - Money Market Funds in Ireland Cranes European Money Fund Symposium PowerPoint Presentation

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Pat Lardner, Chief Executive Patrick Rooney, Regulatory Affairs Manager

Crane’s European Money Fund Symposium

Money Market Funds in Ireland

18 September 2015, Dublin

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Why Ireland for money market funds (MMFs)?

50 100 150 200 250 300 350 400 450

Ireland France Luxembourg Net assets of MMFs (EUR Billion)

Source: EFAMA, June 2015

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Why Ireland for MMFs?

Service provider expertise
Regulatory framework
Tax environment
International distribution (UCITS)
Cost competitiveness

MMFs 22% Non- MMFs 78%

MMFs as a proportion of Irish domiciled net assets

Source: Central Bank of Ireland, June 2015

60 Managers
18 Administrators
10 Legal Advisors
5 Auditors

Source: Monterey Ireland Fund Report 2014

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Ireland’s MMF industry

175 213 276 326 319 310 359 288 297 276 387 402

50 100 150 200 250 300 350 400 450 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 June-15 Euro Billions

Net assets of Irish domiciled MMFs

Source: Central Bank of Ireland, June 2015 Note: A move to security by security reporting by the Central Bank in December 2014 has resulted in a reclassification of the data for MMFs, which impacts on the reported NAV figures from 2014.

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Ireland’s MMF industry - Promoters

164 Irish domiciled MMFs
19 non-Irish domiciled

MMFs

55% 36% 7% 1% 1% 0% 10% 20% 30% 40% 50% 60% US UK Germany Japan Other Source: Monterey Ireland Fund Report 2014 Domiciled 98% Non- Domiciled 2%

MMF assets serviced Promoter origin of Irish domiciled MMFs by % of NAV

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Profile of Irish MMFs - Issuers

Rest

f

World 67% Rest of Euro Area 31% Ireland 2%

Debt securities assets by residence of issuers

Banks 67% Government 16% Non-Financial Corporates 5% Other Financial Institutions 12%

Debt securities assets by sector of issuer

Source: Central Bank of Ireland, June 2015

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Profile of Irish MMFs – Underlying Assets

Rest

f

World 67% Rest of Euro Area 31% Government 16% Other Financial Institutions 12%

Debt securities assets Short Term Vs. Long Term

Long Term 7% Short Term 93% GBP 50%

Currency breakdown

f assets held

USD 36% Euro 13% Other 1%

Source: Central Bank of Ireland, June 2015

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Profile of Irish MMFs - Investor Base

67% 10% 9% 7% 4% 3% 0% 10% 20% 30% 40% 50% 60% 70% Other Financial Intermediaries Non-Financial Corporations Deposit Taking Corporation Insurance Corporations Investment Funds Pension Funds Other EU Member States 61% Ireland 3% Other 11% US 12% Other Euro Area 13%

Investor base by classification and location as a % of NAV

Source: Central Bank of Ireland, 2015

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EU MMF Regulation

Position of Irish Funds

Preserve the features of CNAV MMF valued by investors
Retain a vibrant MMF sector in Europe that can meet the needs
f investors and continue to provide funding for banks, business

and government

Ensure that the important role of MMFs in CMU is recognised
Ensure viable product options for MMF investors and their

managers

Address the policy objectives of ensuring a robust regulatory

framework for money market funds

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EU MMF Regulation – the journey so far….

European Commission

3% capital buffer or

mandatory conversion to CNAV Italian Presidency

Retail/Small

Professional CNAV MMF – carve out for certain investor groups

Low Volatility NAV

(LV-NAV MMF) – ACA for assets < 90 days, NAV rounded to 3 decimals, transition to VNAV within 2-5 years

Variable Shares MMF

– Stable NAV but number of shares adjusted in line with market movements European Parliament

LVNAV MMF - ACA

for assets < 90 days, NAV rounded to 2 decimals, convert to VNAV if shadow NAV deviates by 20 bps, sunset/review clause after 5 years

Public Debt CNAV

MMF – 80% invested in EU public debt by 2020

Retail CNAV MMF -

charities, non-profit

rganisations, public

authorities and public foundations Council of Ministers

Latvian Presidency –

no material progress

Luxembourg

Presidency – possible opportunity to progress but still very entrenched positions

n CNAVs based on

previous statements /international recommendations

Dutch Presidency?

Key proposals relating to CNAVs

2013 2014 2015 2015?

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LVNAV MMF

NAV may be rounded to 2 decimal places
Amortised cost accounting may be used for assets with a residual

maturity of <90 days

Assets >90 days must be valued at mark-to-market
If actual NAV deviates from the CNAV by more than 20 bps, the

NAV must be floated

Sunset clause – Commission review after 4 years; LVNAV

authorisations automatically lapse unless the Commission takes action to extend LVNAV

Framework for application of liquidity fees and redemption gates

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Public Debt CNAV

Invest 99.5 % of its assets in public debt instruments
By 2020 invest at least 80 % of its assets in EU public debt

instruments

“EU Public Debt instruments” means public debt instruments that

are: – cash or government assets of the Member States – reverse repurchase agreements secured with public debt of the institutions of the Union or its bodies, offices or agencies

Framework for application of liquidity fees and redemption gates
European Parliament Impact Assessment concluded that there

would be limited take-up of the proposed Public Debt CNAV

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Government securities in Irish MMFs

Government securities as a % of NAV of Irish MMFs

Other Assets 87% Government Securities 13% Rest of World 55% Euro Area 45%

Government securities: Proportion of Euro Area to other government securities

Source: Central Bank of Ireland, June 2015

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Retail CNAV

Available for subscription only to:

– Charities – Non-profit organisations – Public authorities – Public foundations (No natural persons, pension funds, or accounts where the ultimate beneficiary is a natural person)

Framework for application of liquidity fees and redemption gates
European Parliament Impact Assessment concluded that there

would be limited take-up of the proposed Retail CNAV

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Key priorities for Irish Funds

Removal of sunset clause on LVNAV
Removal of requirement to have 80% invested in EU public debt

by 2020 – remove any % threshold – inclusion of US and other public debt

Removal of fees and gates on the EU Public Debt MMF
Retail CNAV – inclusion of pension funds
No lower than 20 bps collar on LVNAV
Inclusion of government securities in the liquidity threshold

calculation

Extension of the transition period to 24 months
ABCP and securitisation – remove the 397 day maturity

restriction and the 10% investment limit of securitisations

Increase of the Repo limit to 20% from current 10%
Other Member States should be able to opt out of authorising

CNAVs

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Current discussions and looking forward

Luxembourg Presidency
Council of Ministers position and then trilogues
Entrenched views and principles versus workable compromise
Striking the right balance - FSB, IOSCO, ESRB and Schaeuble-

Moscovici letter versus investor requirements, funding needs and CMU objectives

1. Continue to engage with stakeholders: fund promoters,

service providers, legal firms, Department of Finance, MEPs, EFAMA, IMMFA

2. Highlight the important role MMFs play for investors and in

the economy

3. Provide technical input and industry feedback