Thematic Peer Review on Money Market Fund Reforms: Summary Terms of Reference and request for public feedback

The FSB is currently engaged in a thematic peer review focused on reforms related to MMFs. This review aims to assess the progress made by FSB member jurisdictions in addressing vulnerabilities within their domestic MMF markets. The initiative is a response to the 2021 FSB policy proposals and involves a comprehensive examination of the evidence-based explanations provided by member jurisdictions regarding MMF vulnerabilities and the policy decisions they have implemented.
MMFs are found to be susceptible to two primary types of vulnerabilities. First, they can face sudden and disruptive redemptions, and second, they may encounter difficulties in selling assets, particularly in times of economic stress. These vulnerabilities became apparent during the market turbulence experienced in March 2020, with a more significant impact observed in non-public debt MMFs, which can potentially have significant systemic effects.
The 2021 FSB report undertook an analysis of MMF structures and vulnerabilities and presented a policy toolkit aimed at enhancing the resilience of these funds. This toolkit comprises various mechanisms, including swing pricing, credit loss absorption, addressing regulatory thresholds, and reducing liquidity transformation.
While member jurisdictions have some flexibility in adapting these measures to their specific circumstances, international coordination and cooperation are considered crucial to mitigate cross-border spillovers and regulatory arbitrage.
The FSB, in collaboration with IOSCO, will oversee the review of member jurisdictions‘ progress in adopting MMF reforms. This review will be followed by an assessment of the effectiveness of these measures in addressing financial stability risks, with the target year being 2026.
The peer review process will primarily focus on key aspects such as identifying the main MMF vulnerabilities within each jurisdiction, evaluating the circumstances under which these vulnerabilities could pose risks to financial stability, examining the actions taken or planned by authorities in response to the 2021 FSB policy proposals, and analyzing the evidence and considerations guiding policy choices and their potential impacts on MMF investor behavior, fund managers, and short-term funding markets.
The primary source of information for this review will be the responses provided by FSB jurisdictions to a questionnaire, which will cover the issues highlighted in Section 3 and seek information not already available through other means.
Feedback should be submitted by 8 September 2023 to fsb@fsb.org under the subject heading “FSB Thematic Peer Review on MMFs reforms.” Please note that individual submissions will not be disclosed to the public.
The FSB plans to release a report detailing the results of the peer review by the conclusion of 2023. This report is expected to outline any common challenges encountered by member jurisdictions, effective practices identified, and recommendations, where applicable, to address shared issues.