June 2012 Money Market Funds in Europe and Financial StabilityMMFs have long been subject to securities market regulations, the existing frameworks may need to be complemented and revised in order to address broader concerns related to financial stability. 4.As regards the next steps, the paper emphasises that the various policy options will have to be thoroughly assessed and carefully considered in the context of their potential impact on financial stability and market functioning. Several factors will have to be taken into account, such as moral hazard, competition, the impact on financing, regulatory obstacles and implementation challenges (particularly in a low interest rate environment), as well as the need for global consistency. 5.With regard to the ESRB, it could conduct further analysis on the role of MMFs in providing finance to the economy, the differences in MMF profiles and possible policy recommendations to strengthen their robustness, as well as the related macroprudential implications. This analysis could also serve as an input into the European Commission's consultation on shadow banking, which also considers the regulation of money market funds.
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