Money market funds (MMFs) are important providers of short-term financing for financial institutions, corporations, and governments. MMFs are also used by retail and institutional investors to invest excess cash and manage their liquidity.
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 prevalence of this liquidity mismatch, which crystallised during the March 2020 market turmoil, may depend in individual jurisdictions on market structures, use, and characteristics of MMFs.
In 2021, the FSB published a report with policy options to address MMF vulnerabilities by imposing on redeeming investors the cost of their redemptions; enhancing the ability to absorb credit losses; addressing regulatory thresholds that may give rise to cliff effects; and reducing liquidity transformation. This peer review takes stock of the measures adopted or planned by FSB member jurisdictions in response to that report, including those jurisdictions’ evidence-based explanation of relevant MMF vulnerabilities and policy choices made. The review does not assess the effectiveness of those policy measures, as this will be the focus of separate follow-up work by the FSB in 2026.