Resilience of Money Market Funds

Discussion Paper
Published on 23 May 2022


This Discussion Paper seeks views to inform the development of Money Market Fund reform proposals. We have issued it together with the Financial Conduct Authority (FCA), with the endorsement of the Treasury.

Money Market Funds (MMFs) are a type of open-ended investment fund, used in many jurisdictions. In the UK, they are authorised by the FCA under the UK Money Market Fund Regulation.

MMFs are considered to be a low-risk investment that gives investors credit risk diversification and a place to hold, rather than grow, their assets. In March 2020, financial markets reacted to the Covid pandemic with increased selling pressure, volatility and illiquidity. MMFs came under severe strain across major currencies, including in sterling, as investors quickly sought access to cash.

There is concern amongst authorities that underlying vulnerabilities within MMFs remain. (See, for example, Assessing the resilience of market-based finance, and the Financial Stability Board's Holistic Review of the March market turmoil.) If multiple MMFs used by UK investors had suspended in March 2020, there could have been a significant threat to wider UK financial stability. Financial Stability Board members, including the UK, agreed to assess and address the vulnerabilities that MMFs pose in their country. (See the Financial Stability Board's Final Report on Money Market Fund resilience.)

This joint authority Discussion Paper aims to gather views to inform the UK authorities’ development of MMF reform proposals.

This DP discusses possible policy changes that would affect UK MMFs and their users. Such policy changes are also relevant to non-UK MMFs that are marketed to UK investors.

We welcome views from:

  • UK MMF managers
  • UK users of MMFs
  • Non-UK MMF managers that market to UK investors
  • Other participants in short-term funding markets.

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