10.01 In the wake of the global financial crisis, understanding and reducing systemic risk has become a top priority for policymakers and regulators around the world. This chapter discusses ways in which money market funds may give rise or contribute to systemic risk and regulatory efforts to reduce it. 10.02 It begins by defining and illustrating systemic risk in the financial system, using traditional banking as an example. It explains why, before the financial crisis of 2007–2009, money market funds had been regarded as posing little systemic risk and shows the...
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