Note on Financial Stability and Supervision No. 25, June 2021

Today, the Bank of Italy published a new Note on Financial Stability and Supervision on the "Areas of reform of the MMF regulatory framework: an overview and potential options", prepared by Nicola Branzoli, Arianna Miglietta and Luca Zucchelli.

This note summarizes the policy options examined at international and EU level to reform the regulatory framework for money market funds (MMFs) and presents some preliminary considerations. The note first discusses the main vulnerabilities of MMFs and the liquidity strains experienced during the market turmoil in March 2020. It then provides a summary of the ongoing international work to address fragilities in the MMF sector and related policy proposals. Finally, it proposes some high-level principles that could guide the discussion and the selection of potential policy reforms for addressing vulnerabilities in the MMF sector.