The U.S. Office of Financial Research issued a working paper, titled, “The Intersection of U.S. Money Market Mutual Fund Reforms, Bank Liquidity Requirements, and the Federal Home Loan Bank System.” The paper says that after the financial crisis, reforms of money market funds and changes to banks’ liquidity requirements had an unintended consequence of increased Federal Home Loan Banks’ reliance on short-term funding from money market funds to finance longer-term loans and other assets. This increase could make the financial system more vulnerable and pose risks to financial stability.
The research paper, published jointly with the Federal Reserve Bank of Boston, can be found here.
The OFR home page is at: https://www.financialresearch.gov/.
