Independent Directors Urge Regulators to Maintain Money Market $1 NAV

The Independent Directors Council on Tuesday urged regulators to preserve the $1 net asset value of money market funds, saying a floating NAV would not reduce systemic risk in any meaningful way.

The IDC made the comments in response to the Securities and Exchange Commission’s request for comments on the President’s Working Group on Financial Markets’ report on money market reform options.

“Floating the NAV of money funds would, as the PWG report notes, represent a ‘dramatic change,’” said IDC Managing Director Amy Lancellotta. “We strongly oppose such a change, particularly when the option is unlikely to reduce systemic risk.”

IDC said it did support, however, a private emergency liquidity facility for prime money market funds as an additional liquidity backstop in terms of severe market stress. Lancellotta called such a facility “a less drastic, more viable option to strengthen money market funds.”

The Investment Company Institute proposes that fund companies finance this private bank with $350 million in assets and projects that would grow to $24 billion after 10 years.

“Money market funds have provided incomparable benefits to investors and the capital markets for nearly 30 years,” said Dorothy A. Berry, chairman of the IDC and an independent director of PNC Funds. “Money market funds offer investors daily liquidity, a high degree of safety and competitive yields, while providing a critical source of almost $3 trillion in funding in the broader economy.”