Policy proposals to enhance money market fund resilience
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Money market funds (MMFs) are subject to two broad types of vulnerabilities that can be mutually reinforcing: they are susceptible to sudden and disruptive redemptions, and they may face challenges in selling assets, particularly under stressed conditions.
The report considers the likely effects of a broad range of policy options to address these vulnerabilities. Policy options are grouped according to the main mechanism through which they aim to enhance MMF 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 includes considerations on how authorities can prioritise and combine these options.