The Bank of England is pushing for a shake-up of the $6.9 trillion money market fund industry, saying the business amplified strains during the global financial crisis and in the COVID-19 pandemic.
The U.K. central bank's Governor Andrew Bailey said the Financial Stability Board soon will consult on changes to the market, which covers short-term debt securities like commercial paper. At the height of turmoil in the early days of the pandemic, those funds were not resilient, he said.
The remarks, including some detailed options for what regulators could do, are the clearest sign yet that action is coming for money market funds, which are supposed to have cash-like liquidity but instead froze up when the global system was under strain.
"We are very much in the world of having a second chance to deal with the issue of how to structure money market funds consistent with their role," Mr. Bailey said in a text of a speech to the International Swaps & Derivatives Association.