Patomak Comment Letter on the Financial Stability Board Consultation Report Regarding Policy Proposals to Enhance Money Market Fund Resilience
Patomak Global Partners Chief Executive Paul Atkins and Senior Advisor Craig Lewis submitted a comment letter to the Financial Stability Board (FSB) this week regarding its money market fund (MMF) regulation consultation report.
The comment letter describes the critical role MMFs play as a cash management tool and as a buyer of commercial paper issued by non-U.S. banks. It also provides data to show that MMFs were largely resilient during March 2020 market events and explains why large-scale redemptions from certain MMFs can generally be explained as an unintended consequence of a 2014 SEC regulatory threshold for gating and liquidity fees. Removing this threshold in favor of discretionary gating would go a long way toward addressing valid concerns about the stress-amplifying role that some institutional prime MMFs can play. Atkins and Lewis conclude that to directly address concerns about systemic risks related to short-term lending market risks, however, regulators should focus on improving banking sector regulations.
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