As promised late last year when it addressed nonbank financial intermediation (NBFI), the Financial Stability Board is seeking comment on ways to reduce the risk that money-market funds (MMFs) succumb to runs under stress or, as occurred in both 2008 and 2020, require taxpayer backstops. Rather than laying out a specific reform proposal, the consultation describes a series of options largely aimed at non-public MMFs (i.e., prime funds). Echoing some in the U.S., the consultation mentions in passing barring these funds, but options on which comment is sought would instead change the business model. Some of these options are so structurally significant that they might shutter some prime funds. The overall construct of MMF sponsors could also change if, for example, the FSB advances proposals for capital buffers and nations then adopt them.
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