The Financial Stability Board (FSB) has published a report containing proposals to enhance the resilience of money market funds (MMFs), a key deliverable for 2021 of the FSB’s work programme on non-bank financial intermediation. The accompanying press release notes that MMFs are subject to two main types of vulnerabilities: sudden and disruptive redemptions, and challenges in selling less-liquid assets (especially in stressed conditions).
The report considers the likely effects of a broad range of policy options to address these vulnerabilities, including the use of capital buffers to absorb losses, reflecting the feedback to a consultation launched in June 2021 (as previously reported in this Bulletin).
The FSB acknowledges that flexibility is required for individual jurisdictions to adapt the proposed measures to their particular circumstances, but stresses the importance of cross-border cooperation and coordination. The FSB will work alongside the International Organization of Securities Commissions (IOSCO) to review the progress made, with a “stocktake” due at the end of 2023 and a further assessment by 2026.
Final report: Policy proposals to enhance money market fund resilience
Press release
Overview of responses to the consultation
Webpage
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