The presidents of all 12 Federal Reserve regional banks backed tougher oversight of some money-market mutual funds to strengthen the financial system, saying one alternative is to replace the fixed $1 share price with a market-based value, according to Bloomberg
According to the newswire, the Fed’s regional bank chiefs declared in a joint letter to the Financial Stability Oversight Council that their recommendations focus mainly on prime funds, which are those that can buy corporate debt, because they are subject to the greatest credit risk.
“We agree with the council’s proposed determination that the conduct, nature, size, scale, concentration and interconnectedness of MMFs’ activities and practices could create or increase the risk of significant liquidity and credit problems spreading among bank holding companies, nonbank financial companies and the financial markets” of the U.S., the Fed regional bank presidents said in a letter dated today.
“For this reason, we support the council’s efforts to address the structural vulnerabilities” of the funds, the central bank officials stated in a letter released by the Boston Fed.
Read more in Bloomberg
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