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dc.contributor.authorMcCabe, Patrick E.en_US
dc.contributor.authorCipriani, Marcoen_US
dc.contributor.authorHolscher, Michaelen_US
dc.contributor.authorMartin, Antoineen_US
dc.date.accessioned2012-07-27en_US
dc.date.accessioned2012-08-17T14:36:24Z-
dc.date.available2012-08-17T14:36:24Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/60899-
dc.description.abstractThis paper introduces a proposal for money market fund (MMF) reform that could mitigate systemic risks arising from these funds by protecting shareholders, such as retail investors, who do not redeem quickly from distressed funds. Our proposal would require that a small fraction of each MMF investor's recent balances, called the minimum balance at risk (MBR), be demarcated to absorb losses if the fund is liquidated. Most regular transactions in the fund would be unaffected, but redemptions of the MBR would be delayed for thirty days. A key feature of the proposal is that large redemptions would subordinate a portion of an investor's MBR, creating a disincentive to redeem if the fund is likely to have losses. In normal times, when the risk of MMF losses is remote, subordination would have little effect on incentives. We use empirical evidence, including new data on MMF losses from the U.S. Treasury and the Securities and Exchange Commission, to calibrate an MBR rule that would reduce the vulnerability of MMFs to runs and protect investors who do not redeem quickly in crises.en_US
dc.language.isoengen_US
dc.publisherFederal Reserve Bank of New York New York, NYen_US
dc.relation.ispartofseriesStaff Report, Federal Reserve Bank of New York 564en_US
dc.subject.jelG01en_US
dc.subject.jelG20en_US
dc.subject.jelG28en_US
dc.subject.ddc330en_US
dc.subject.keywordmoney market fundsen_US
dc.subject.keywordrunsen_US
dc.subject.keywordredemption restrictionsen_US
dc.subject.keywordsystemic risken_US
dc.titleThe minimum balance at risk: A proposal to mitigate the systemic risks posed by money market fundsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn720243955en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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