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Regulators to Seek Money Market Reforms06/12 09:23

   Top regulators pledged Friday to push reforms in a key corner of U.S. 
financial markets that the Federal Reserve and Treasury had to rush to support 
after it was roiled during the coronavirus outbreak in the spring of 2020.

   WASHINGTON (AP) -- Top regulators pledged Friday to push reforms in a key 
corner of U.S. financial markets that the Federal Reserve and Treasury had to 
rush to support after it was roiled during the coronavirus outbreak in the 
spring of 2020.

   Members of the Financial Stability Oversight Council discussed the reforms 
aimed at the so-called short-term funding markets, which include money market 
mutual funds holding trillions of dollars.

   The oversight council is an interagency group headed by Treasury Secretary 
Janet Yellen, who said the 2020 crisis prompted "extreme policy interventions" 
by the Federal Reserve and Treasury to restore order in the market.

   Federal Reserve Chair Jerome Powell, also a member of the council, said the 
2020 crisis was triggered by a "dash for cash" that prompted the Fed to step in 
with back-up financing to calm the turmoil.

   "Rapid redemptions at money market funds resulted from and in turn 
exacerbated the liquidity pressures," he told the panel.

   Powell said after the Fed created a Money Market Mutual Fund Liquidity 
Facility with $10 billion in backing from the Treasury Department, the "turmoil 
subsided, conditions in short-term funding markets improved and access to 
credit increased."

   The council received a closed-door briefing from the staff of the Securities 
and Exchange Commission on the comments it has collected on what reforms need 
to be pursued to make short-term funding markets more resilient at times of 
financial crisis.

   SEC Chairman Gary Gensler told the group during its open meeting that he has 
directed SEC staff to prepare recommendations that can be voted on by the 
five-member SEC. Yellen said she fully supported the efforts by the SEC to 
reform the current system.

   Council members also expressed concern that the global financial system is 
not moving quickly enough to prepare for the transition away from LIBOR, the 
London interbank offered rate, which has been the interest rate benchmark for 
trillions of dollars in financial contracts.

   Regulators have supported moving from the LIBOR rate to the Secured 
Overnight Financing Rate, or SOFR, by the end of this year.

   But Yellen and other officials expressed worries that not enough was being 
done now to prepare for the switch from LIBOR to SOFR.

   "More must be done to facilitate an orderly transition," Yellen told the 
panel. "While important progress is being made in some segments of the market, 
other segments, including business loans, are well behind where they should be 
at this stage of the transition."

 
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