Sinn Féin MEP Matt Carthy has criticised the European Parliament’s decision on the regulation of money market funds which was adopted today, saying the measures do not go far enough in addressing the dangers of a huge and unregulated shadow banking sector.
Carthy, a member of the Economic and Monetary Affairs Committee, spoke on the topic during the plenary session in Strasbourg.
Addressing MEPs, Carthy said: “The outcome of this process – which began as an attempt to reduce systemic risk in the shadow banking sector – is deeply disappointing.
“Let’s not forget the reason why this proposal was introduced in the first place – it was the role money market funds played in sparking widespread panic and fire sales in the US during the financial crisis.
“While any attempt to regulate the shadow banking sector is welcome, this outcome fails to make meaningful change in the regulation of money market funds. We had an opportunity today to reduce the risk of a future crisis in the global economy and we failed to take it.
“These changes will be largely cosmetic, and the phase-out of C-NAVs – recommended by the European Systemic Risk Board – has not been agreed. Systemic risk remains firmly in place.
“It’s true that certain funds in Ireland and Luxembourg, which have lobbied aggressively against change, will benefit from this outcome. But at what cost?
“Last year the Financial Stability Board warned that shadow banking in Ireland was, unbelievably, 10 times the size of our economy.
“We’ve already lived through a financial crisis in Ireland caused by a banking sector that was actually formally regulated – albeit, wholly inadequately.
“Not only is this a huge risk for our economy, but it also poses a major risk of contagion to the global economy.
“We need to take the dangers posed by a huge and unregulated shadow banking sector very seriously, and act accordingly.”
