FSOC, SEC Chair on MMF Reforms
The Financial Stability Oversight Council for the U.S. Department of the Treasury met Friday and discussed money market mutual fund reforms briefly at the start of the meeting. (LIBOR was also a big topic of discussion.) A "Readout of Financial Stability Oversight Council Meeting" says, "U.S. Treasury Secretary Janet L. Yellen today convened a meeting of the Financial Stability Oversight Council (Council) in executive and open sessions by videoconference. During the executive session, the Council heard an update from Securities and Exchange Commission (SEC) staff on money market fund reform, including a discussion of public comments received in response to reform options proposed by the President's Working Group on Financial Markets. The Council also heard an update from Treasury Department staff regarding the progress made on Council priorities, including: 1) vulnerabilities in nonbank financial intermediation, 2) climate change, and 3) Treasury market resilience. In the open session, the Council voted to approve a statement highlighting the importance of money market fund reform and supporting the SEC's engagement on this important issue. `The Council also received an update from the Federal Reserve Board on the importance of accelerating the financial sector's transition from LIBOR and using reference rates for derivatives and capital markets products that have sufficient underlying volumes compared to contracts referencing the rate." At his first FSOC meeting as SEC Chair, Gary Gensler commented, "I am honored to be here rejoining the Financial Stability Oversight Council meeting, today for the first time as Chair of the Securities and Exchange Commission. I believe in this Council's mission to identify and respond to financial stability risks and to better promote market discipline. Financial stability is also a part of my remit as Chair of the SEC. Last spring, we witnessed system-wide issues affecting critical parts of our short-term funding markets, including money market funds, commercial paper, and the treasury repo markets. We also saw challenges in the treasury repo markets in the fall of 2019. Let me turn to money market funds, which are an important part of our markets and source of wholesale funding for many issuers. The SEC sought to address structural issues in these funds in reforms adopted in 2010 and 2014. Based on the events of last spring, the SEC, this Council, and the President's Working Group have engaged in a review of how we can make further progress to enhance the resiliency of these funds." He added, "The events brought particular focus to prime money market funds, and their interrelationship with investments in commercial paper and certificates of deposit. CP and CD have limited liquidity in good times, and in critical weeks of stress last spring, virtually disappeared. It's important to ensure the resiliency of money market funds. I am directing SEC staff to look into these issues, in coordination with other federal agencies, and to consider any further reforms needed." See the FSOC's "Statement on Money Market Fund Reforms" here, and watch for more coverage from the meeting and discussions on pending reforms in coming days.
