FSB publishes final report with policy proposals to enhance money market fund resilience

The policy toolkit includes mechanisms to: impose on redeeming fund investors the cost of their redemptions; absorb credit losses; address regulatory thresholds that may give rise to cliff effects; and reduce liquidity transformation.

The report also includes considerations on how to prioritise options in the context of identified vulnerabilities; and how authorities can combine options to address all MMF vulnerabilities prevalent in their jurisdiction.

FSB members are assessing, or will assess, MMF vulnerabilities in their jurisdiction and will address them using the framework and policy toolkit in this report, in line with their domestic legal frameworks. The FSB recognises that individual jurisdictions need flexibility to tailor measures to their specific circumstances. At the same time, as shown by the experience of March 2020, there are important cross-border considerations to be kept in mind. International coordination and cooperation on implementing policy reforms is critical to mitigate spillovers and avoid regulatory arbitrage.

The full report is available at https://www.fsb.org/2021/10/policy-proposals-to-enhance-money-market-fund-resilience-final-report/

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