Regulators and government bodies within the UK are questioning the suitability of fund regulation within the European Union, according to transcripts from the Treasury Select Committee and reports in the Financial Times. 

As part of the Brexit agreement, the UK said EU fund regulation would be considered "equivalent" until the end of 2025. As a result, EU-based funds can still use passports to sell to UK investors.

However, as the deadline approaches the "equivalence" regime looks under threat. This would mean that EU fund managers may need to go through regulatory hurdles, offer UK based investor structures or stop offering some products in the UK.

In a Treasury Select Committee on 16 January, Andrew Bailey, governor of the Bank of England, stressed concerns around money-market funds.

Money-market funds caused issues in the global financial crisis and more recently when the UK economy spiralled after the Mini Budget.

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Bailey said the global Financial Stability Board, which he chairs, will be "putting out quite a lot of guidance this year on this matter". However, he added it is up to the national jurisdictions to implement it.

"The UK will move forward and I think the Bank [of England] and the FCA [Financial Conduct Authority] will come out with their own proposals this year on what we do on the money-market funds front," he said.

However, he continued they would need the EU to do so as well and "they have not done it yet".

Bailey explained that very few sterling money-market funds are domiciled in the UK, with most domiciled in the EU. UK investors hold about £280bn in these funds.

According to the Financial Times, the EU has indicated it will not be able to work on proposals to improve money market funds until the next European Commission mandate in 2025.

Bailey said he thought UK changes were unlikely to be implemented this year, but there will be "a lot of progress".

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Following recent reports, a spokesperson from HM Treasury said to Investment Week: "We are working closely with UK regulators, our international partners and the EU to improve the resilience of money market funds. It is too early to speculate on the outcome of these reforms."

Meanwhile, Bailey also highlighted open-ended funds are an area of work this year.

"There will be some revision, I suspect - there needs to be - to the standards on open-ended funds coming forwards," Bailey said.

The Financial Times recently reported the FCA had written to its peers in Ireland and Luxembourg about what standards they hold their funds to.

The European Securities and Markets Authority declined to comment and the FCA did not respond to a request for comment.