* Lawmakers trade barbs over regulating funds
* Splits remain over new rules to regulate benchmarks
* Time running out for deals ahead of elections
By Huw Jones
LONDON, Feb 17 (Reuters) - European Union lawmakers havedelayed new rules to regulate money market funds used by bigcompanies to park billions of euros after they clashed over howtough the changes should be.
The funds are also used by banks for short-term funding andthe most contested element is a requirement for one type offund, known as constant net asset value (CNAV), to hold a cashbuffer equivalent to 3 percent of assets.
The draft rules, and a separate draft law on regulatingbenchmarks such as the scandal-hit Libor interest rate, aim tomake markets more transparent after the 2007-09 financialcrisis, but both measures now face delays.
The European Parliament's economic affairs committee founditself split on Monday over regulating money market funds, atrillion euro sector in the 28-country bloc.
The aim is to stem any runs on the funds by investors duringfuture financial crises.
The Association of Corporate Treasurers has said the changeswould make the funds unviable and threaten an essential cashmanagement tool for leading companies in many industries.
CNAV funds account for half of the money market funds in theEU, most of which are based in Luxembourg, Ireland and France.
Gay Mitchell, an Irish centre-right member of the committee,said few lawmakers really understood what CNAVs were and hastyrulemaking could see such funds flee the EU.
"It's outrageous the way we are rushing through thislegislation," Mitchell told the meeting.
But Philippe Lamberts, a Belgian Green Party lawmaker,described Mitchell's assessment as "bordering on insulting".
"You are throwing around figures just to scare people...That is like the industry is doing. I won't take this," Lambertstold the meeting.
CNAV funds aim to have a constant, one-euro share price butmany regulators prefer the transparency of the other main typeof fund known as variable net asset value of VNAV, whose shareprice fluctuates in line with the market's ups and downs.
CNAV funds are effectively banned in France, whose regulatoris anxious that the draft law is not diluted.
"Our first choice by far is a ban on CNAV funds forfinancial stability reasons but, for a compromise, having aminimum 3 percent capital buffer on them would be acceptableonly if the threshold of 3 percent is maintained," said Benoitde Juvigny, secretary general of French regulator AMF.
"I have been surprised at how the CNAV industry has reacted,because converting from CNAV to VNAV is not so impossible toorganise," de Juvigny told Reuters.
Time is running out as parliament goes to the polls in Mayand a new European Commission, whose role is vital in EUlawmaking, will not be appointed until the end of October.
As expected, lawmakers delayed voting on a law to regulatefinancial benchmarks like Libor due to splits over which indicesshould fall within its scope.
Some members say energy and commodity indices should be leftout, while others want them included.
As allegations emerged of rigging in foreign exchangebenchmarks as well, some lawmakers argued that the new rulesmust be crystal clear even if that means a delay.
"We must not end up with a half-baked regulation here,"French centre-right member Jean-Paul Gauzes said.
Votes could take place on March 3, but some lawmakers weredoubtful of this.
The agreement of EU states is also needed for the twomeasures to become law. The lawmakers know that, without aunited front, their ability to shape the final deal is weaker.
Legal & General (LGEN)
