The regulatory dialectic in bank-sponsored money market funds

Stefan Jacewitz, Jonathan Pogach, Haluk Unal and Chengjun Wu

Journal of Financial Stability, 2025, vol. 80, issue C

Abstract: The regulatory dialectic describes the dynamic process of banks and regulators continuously acting and reacting to one another. We provide empirical evidence of the regulatory dialectic in the prime institutional money market fund (PI-MMF) industry. Regulations on commercial deposits fueled growth in bank-sponsored PI-MMFs as a form of shadow banking in a relatively less regulated market. Re-regulation following the 2008 financial crisis halted this rapid growth, and the industry shifted from PI-MMFs to government institutional MMFs. We conjecture that this dialectical process will continue, and the decline of the PI-MMF may engender a shift toward structurally similar products, like stablecoins.

Keywords: bank; bank holding company; bank run; financial crisis; liquidity risk; money market fund; systemic risk; too big to fail (search for similar items in EconPapers)
JEL-codes: G2 G21 G23 G28 H12 H81 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:80:y:2025:i:c:s157230892500083x

DOI: 10.1016/j.jfs.2025.101454

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