Fitch writes "European Banks Not Reliant on European CNAV MMF Funding". The brief says, "Fitch Ratings says that European banks demonstrate limited reliance on European Constant NAV (CNAV) money market funds as a source of funding. Fitch estimates that European CNAV money market funds provide eligible European banks with approximately 1% of their deposit and short term funding, on average, with a maximum of 3.4%. Only five banks in the sample had funding from European money market funds in excess of 2% of total funding. Extrapolated to all European money market funds (including variable NAV funds), the average European bank exposure to European money market funds as a source of funding would be 2% (on a simple pro-rata basis). Banks have been under pressure to lengthen their funding profiles in response to regulatory reforms, notably Basel III. Some banks have enacted specific policies to reduce their funding through money market funds. This has resulted in a reduced supply of eligible securities for inclusion in money market fund portfolios. Nonetheless, investors continue to demand exposure to money market funds, notably because of the high level of cash on corporate balance sheets. Fitch notes the diversification potential of money market funds compared to direct deposits with banks.... Fitch's sample covered all European banks that appear in rated money market fund portfolios as of end January 2013, a sample of 33 banks in total. Fitch derived bank funding levels (deposit and short term funding) as of the most recent reporting date were compared to total combined money market fund portfolio holdings as of the same date. Fitch rates 43 European money market funds as of January 2013 with total assets of approximately EUR290bn. As of end-September 2012 the European money market fund industry had total assets of EUR1,054bn according to European Fund and Asset Management Association (EFAMA) data. At end December 2012 money market funds belonging to the Institutional Money Market Funds Association (IMMFA) had total assets under management of approximately EUR500bn."
