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The regulatory dialectic in bank-sponsored money market funds

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  • Jacewitz, Stefan
  • Pogach, Jonathan
  • Unal, Haluk
  • Wu, Chengjun

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.

Suggested Citation

  • Jacewitz, Stefan & Pogach, Jonathan & Unal, Haluk & Wu, Chengjun, 2025. "The regulatory dialectic in bank-sponsored money market funds," Journal of Financial Stability, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:finsta:v:80:y:2025:i:c:s157230892500083x
    DOI: 10.1016/j.jfs.2025.101454
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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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