Prime Money Funds Might Need Stiffer Rules
Federal Reserve and FSB signal March runs on money funds may suggest closer regulation is needed for corporate liquidity vehicles.
The Federal Reserve is signaling that the coronavirus disruptions that hit financial markets in March indicate prime money market funds and other sources of short-term funding may need tougher rules.
“The runs on prime money funds and commercial paper were particularly disappointing,” Fed vice chairman of supervision Randal Quarles said in prepared remarks for a Thursday speech. He added that “it is worth asking whether there may be other steps needed to secure these very important sources of liquidity.”
Quarles, speaking at an Institute of International Finance event, also said that this year’s tumult raises questions about whether regulations imposed on money market funds after the 2008 financial crisis “fell short.” Quarles said the Financial Stability Board (FSB), a group of global financial regulators he heads, will be examining this issue.
See also:
- Money Fund Madness in March: Why the flood of corporate short-term investments out of prime money funds was borderline irrational—and what corporate treasury teams can learn from it.
- MMF Opportunity in Volatile Markets
- Still Ignoring the Risks Inherent in Bank Deposits?
- Revisit Your Corporate Investment Policy
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