UK MMFs In Focus: FCA And Bank Of England Soften Stance On Liquidity Buffers

What You Need to Know

In our previous publication UK MMFs in Focus: Practical Implications of the TMPR Extension, we discussed the HM Treasury and FCA announcement of 14 May 2026 on their plans to reform the UK MMFR regime.

Since then, the FCA and Bank of England have softened their position on daily liquid assets (“DLA”) and weekly liquid assets (“WLA”) levels. For further details of the updated proposal, please refer to the FCA update on reforms to the UK Money Market Fund Regulation.

What did the original proposal set out for DLA and WLA?

The original consultation CP23/28 proposed a significant increase in minimum liquid asset requirements for all MMFs, raising DLA to 15% and WLA to 50% of assets.

It also proposed “delinking,” removing the regulatory link between stable NAV MMFs’ liquidity levels and the need for managers to consider or impose tools such as liquidity fees or redemption gates.

What changes now?

Following stakeholder concerns about the proposed increases, and further FCA/Bank of England engagement, data collection, and analysis, the approach has shifted. Rather than fixed increases, the FCA will introduce a new rule requiring all MMFs to “hold sufficient liquidity for adequate resilience”.

Current minimum WLA requirements under the UK MMFR will be retained in rules, but guidance will set a strong supervisory expectation of 40% WLA for stable NAV MMFs and 20% WLA for variable NAV MMFs. Current minimum DLA requirements will be retained with no new DLA guidance, though DLA and WLA together must still be sufficient for resilience.

Delinking and enhanced Know Your Customer requirements on investor concentration and correlated withdrawal risk will largely proceed as originally proposed.

What are the next steps?

The Government expects legislation repealing the MMFR to be introduced by the end of 2026, and the FCA plans to align its new MMF rules with this timetable.