BlackRock Inc, the world's largest money manager, offered a detailed plan on Thursday to break a deadlock with regulators over tightening rules on the $2.6 trillion U.S. money market fund industry.
Regulators have been seeking to tighten rules on money funds in the wake of the financial crisis, when problems at one fund spooked investors and sparked a run of withdrawals that threatened to destabilize the economy. But the industry has so far successfully defeated the plans by arguing that the new rules would make the funds too expensive to run and unappealing to customers.
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Under BlackRock's proposal, money funds would maintain a constant net asset value in times of market turmoil by imposing a fee of 1 percent on customer withdrawals. The so-called stand-by liquidity fees would go back into to the funds to bolster their share price.
New York-based BlackRock included the proposal in a 26-page letter to regulators.
BlackRock also said it opposed the latest reform options offered by the U.S. Financial Stability Oversight Council last month. Those options relied on either ending the industry's fixed $1-per-share pricing policy or requiring funds to set aside capital against future losses.
Although BlackRock has indicated a willingness to compromise in the past, most of the money fund industry, including leading companies like Fidelity Investments and Federated Investors Inc, have long opposed floating share prices and capital requirements.
(Reporting by Aaron Pressman; Editing by Lisa Von Ahn)