Free Trial
RATINGS

A Couple Of Affirmations On Friday

NZD

China Covid Unrest Boosts USD

ASIA

Coming up in the Asia-Pac session on Monday

MNI

Coming up in the Asia-Pac session on Monday

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
(MNI) WASHINGTON
WASHINGTON (MNI)

Federal Reserve and SEC officials said Tuesday they are considering new money market regulations after turmoil sparked by the coronavirus pandemic signaled that decade-old reforms didn't work.

"The events of this past March show that those reforms may not be enough," Deputy Treasury Secretary Justin Muzinich told a New York Fed conference.

"While policymakers were able to avert a run, it is worth asking whether there are ways to enhance the liquidity resources available to funds without using a bright line test or whether there are ways to draw a line without creating a first-mover advantage," Muzinich said.

"One might ask whether we have exchanged one psychological bright line for another," he added. "While the 2008 episode centered on 'breaking the buck,' in 2020 market participants worried that a fund dipping below the 30% weekly liquid assets threshold could similarly accelerate fund redemptions."

The Fed's Money Market Mutual Fund Liquidity Facility created in March was critical to restoring financial market functioning, Muzinich said, but high demand for fund withdrawals was due to different metrics than those during the 2008 financial crisis.

NEW STRESS

"There is no doubt that we need to reexamine the reforms of the last time," SEC Chairman Jay Clayton said at a different event Tuesday.

Past reforms "were a step in the right direction, particularly with regards to liquidity, but we still saw that stress when the CP market dried up" in March, Clayton said.

The Fed's vice chair for supervision Randal Quarles said Tuesday "The jury is still out what more there might need to be done with respect to regulation given the events in March and April."

"Right now it's all hands on deck" and policymakers are still working to counter the the coronavirus, said Jelena McWilliams, chairwoman of the Federal Deposit Insurance Corporation, but when data is available and a thorough analysis is complete "ultimately Congress will have to take a look."

MNI Washington Bureau | +1 202-371-2121 | evan.ryser@marketnews.com
MNI Washington Bureau | +1 202-371-2121 | evan.ryser@marketnews.com

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.