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

Financial Policy Committee

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...