Bank of England Governor Andrew Bailey said regulators needed to come up with reforms that address vulnerabilities in money market funds which were exposed by the “dash for cash” at the onset of the coronavirus pandemic last year.
Investors in British money market funds withdrew 25 billion pounds ($35 billion), equivalent to 10% of their total holdings, between March 12 and March 20 last year, contributing to the BoE’s decision to restart both its bond purchase programme and an emergency repo facility.
The United States faced similar problems and the Federal Reserve launched a new lending programme for markets too.
“The dash for cash provided an unwelcome reminder that the post-financial crisis (reforms) did not finish the job and left a dangerous gap in our exposure to the risk of financial instability,” Bailey said in a speech to the International Swaps and Derivatives Association.
“We must finish the task this time,” he said.