Bank of England calls on money market funds to bolster liquidity levels

Financial Policy Committee makes resilience call

Cristian Angeloni
clock • 3 min read

The Bank of England’s Financial Policy Committee has called on money market funds to increase their liquidity levels to boost their resilience.

In a report about risks in market-based finance, the FPC identified money market funds as a "significant threat" to financial stability due to their interconnectedness with financial institutions, open-ended funds, pension funds and insurance companies, which rely on these funds to manage short-term liquidity and meet margin calls. The call from the FPC came as it identified liquidity mismatch in money market funds as a "key vulnerability" in 2015 and 2021. The committee explained that, during the dash-for-cash in March 2020, money market funds saw large outflows as investors redeemed...

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