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ARTICLE · 14 JULY 2020

ESMA Publishes Statement Addressing "External Support" For Money Market Funds

Dillon Eustace
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In light of the liquidity challenges faced by many money market funds (MMF) during COVID 19, ESMA has issued a public statement providing its interpretation of the provision of external support by third parties under Article 35 of the MMF.

IrelandFinance and Banking
Brian Kelliher
Brian Kelliher
Cillian Bredin
Cillian Bredin
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In light of the liquidity challenges faced by many money market funds (MMF) during COVID 19, ESMA has issued a public statement providing its interpretation of the provision of external support by third parties under Article 35 of the MMFR1.

Background

As readers will be aware, Article 35 of the MMFR prohibits a MMF from receiving "external support" in order to maintain liquidity or stability of NAV per share. This prohibition arose from the legislators' concerns that any such external support provided to MMF increases the contagion risk between the MMF sector and the rest of the financial sector.

Article 35 of the MMFR sets down five scenarios which amount to the provision of external support to a MMF.

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