ABA Opposes Floating NAV
The American Bankers Association (ABA) submitted a comment letter to the FSOC opposing the imposition of a floating NAV. They write, "ABA offers the following general comments on the Council's proposed recommendations: First, there is very strong support for retaining a stable net asset value (NAV) MMF, as this product is preferred by trust departments and corporate trustees as a timely and economical way to invest short-term customer cash. Second, any regulatory action must avoid creating the perception that investments in MMFs are equivalent to insured bank deposit accounts in terms of federal supervision or backing. Third, the Council should carefully consider the sufficiency of the SEC's 2010 reforms and give them adequate weight, as many bankers are convinced that further reforms are not needed. In their examination of this issue, policymakers should carefully evaluate issues regarding the liquidity and credit quality of MMF portfolios, noting the differences between federal government instruments and those that are not backed by the full faith and credit of the federal government.... As with medicine, the first rule of the regulatory practitioner is to do no harm. We believe that of the three options for additional regulation offered by the FSOC for public comment, the least risk of damaging the value of MMFs to investors -- working from the foundation of a continued stable NAV regime -- is to be found in regulatory consideration of reforms involving questions of capital to support potential losses, adequate liquidity, prudent diversification, and useful disclosures.... In conclusion, ABA strongly supports the continued use of a stable NAV. To eliminate this critical feature of MMFs would severely undermine the usefulness of the product to bank trust departments and corporate trustees, as well as to other bank investors."
