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We have looked in particular at the implications of the guidelines for money market funds - given pending EU legislation on money market funds. We are concerned about internal rating systems being imposed that are needlessly demanding in terms of reporting, backtesting, analytical requirements... while not providing any additional value to the ultimate goal of having safe money market funds. To the contrary, to the extent that the additional burden that in this way would be imposed would be particular difficult to bear for smaller money markets funds, such requirements could actually be detrimental for smaller players and hence enhance the position of the larger money market funds. This would increase, rather than prevent, systemic risk. As such, we welcome the ESMA guidelines - especially the view that the assessment of the creditworthiness of a money market fund must not longer consider each recognized credit rating agency. We would suggest to allow the fund manager flexibility in designing his internal rating system, so as to allow for divergent views and proportionality.
We welcome the revision of the ESMA Guidelines on MMFs, notably, the fact that the assessment of the credit quality of a money market instrument must not consider (as was previously the case) each recognized credit rating agency that has rated the instrument. We believe, however, that three points merit further clarification in Paragraphs 47 and 48 of the consultation paper relating to:

1. Own documented assessment of credit quality
We believe an internal rating scale imposed to MMF managers is inappropriate. The different views of market participants are a key pillar for the well-functioning of financial markets. Divergent views translated into different credit assessments between MMF managers should be permitted. Each manager of MMFs should be allowed to create its own credit assessment system with the understanding that the manager would have to provide the design and operational details of its system to allow competent authorities to evaluate the appropriateness of the system.

2. Reliance to external credit rating agencies
The current proposal requires that MMF managers monitor the credit ratings provided by at least one CRA registered and authorized by ESMA. We propose that the guidelines should clarify that the number of credit rating agencies to be considered should be determined by the fund’s manager taking into account the fund’s investment objectives and the best interests of the share/unit holders.
We thus propose the following amendment to the proposed text:
Such an assessment [should] may have regard to the credit rating(s) provided by one or more credit rating agencies ..." (Sentence 2 in paragraphs 47 and 48).

3. Downgrades
We agree with the proposal made in Paragraph 47 that “any downgrade below the two highest short-term credit ratings used by such an agency should lead the manager to undertake a new assessment of the credit quality of the money market instrument”, provided that this proposal means that the manager should undertake such a new assessment only when the downgrade has been decided by the agency or agencies that the manager is using to assess the credit quality of money market instruments. The same remark applies to paragraph 48."