themselves have been eligible for direct investment. on both sides of the atlantic, many are so - called constant net asset value ( cnav ) funds. 3 stripping through the detail, this means that they promise to return to savers, on demand, at least as much as they invest. just like a bank. and just like a bank, they are subject to runs. if i, an investor, lodge notice of redemption one day, typically i expect to be paid the following day. if my withdrawal is large, the fund may have to sell assets to meet the redemption. if investors know or fear that a lot of their peers will also be redeeming, then they have an see baba n, mccauley r and ramaswamy s ( 2009 ), “ us dollar money market funds and non - us banks ”, bis quarterly review, march 2009. incentive to ( try to ) get in first, in order to avoid the depletion in the value of the fund likely to flow from the forced asset sales. and, if a constant - nav fund ’ s value goes just a few basis points below par ( 100p in the £1 ), they effectively have to close, fuelling the incentive to run. if this sounds like a bank, it is because it is just like a bank. the money fund industry is a major supplier of short - term funding to banks. so its own maturity mismatch masks the true liquidity position of the banking sector, and injects extra fragility into the financial system as a whole. this is no longer theoretical. 4 when the reserve fund “ broke the buck ” after lehman ’ s failure, there was a run by institutional investors. the industry had to be given access to central banks ’ liquidity facilities to contain the vortex. many banking groups running supposedly arms - length money funds injected “ capital ” into their funds to keep them afloat. yet the funds had not been consolidated, and their bank sponsors had not had to hold capital against such implicit support. echoing the concerns that paul volcker is reported to have expressed at internal federal reserve meetings around thirty years ago, 5 the bank of england believes that constant - nav money funds should not exist in their current form. they should become either regulated banks or, alternatively, variable nav funds that do not offer instant liquidity. meanwhile, so - called “ enhanced return " funds should surely have to make clear what they are and what they are not

mark carney : winning the economic marathon speech by mr mark carney, governor of the bank of england and chairman of the financial stability board, at the commonwealth games business conference, glasgow, 23 july 2014. * * * accompanying charts can be found at the end of the speech. it is a pleasure to be in glasgow for the opening of the 20th commonwealth games. for the athletes, the games represent the culmination of years of training. for fans they are a chance to witness great sporting achievements. i remember attending the 1978 games in my hometown of edmonton and being mesmerised by one of its stars : scotland ’ s allan wells. at just 26, wells burst onto the scene, winning silver in the 100 metres, beating the reigning olympic champion in the process. he spurred scotland to gold in the 4x100 metres, won the 200 metres outright and set the stage to become the fastest man in the world two years later at the olympics. the uk economy has also had some sprint success of late and is the current holder of the “ fastest growing advanced economy in the world ” title. that is welcome after some difficult years, but what really matters is what comes next. the bigger prize is winning the economic marathon by achieving a durable expansion. we must replicate the sprint success of wells over longer distances, taking our lead from scotland ’ s liz mccolgan, who memorably won gold in the 10, 000 metres last time the games were held in scotland, before going on to win the new york, tokyo and london marathons. to understand how we – and by “ we ” i mean the uk, the commonwealth and the world – can win the economic marathon, i want to draw on three less athletic, but nevertheless great, scots, each of whom points us to an essential ingredient of economic success : the right policy framework ; an open trading system ; and fair and effective financial markets. in all these respects, the uk is leading the way. the right policy framework the uk ’ s current policy framework has its origins in the work of william paterson of skipmyre, dumfriesshire. more than three centuries ago paterson proposed the establishment of the bank of england to “ promote the publick good and benefit of our people … ” 1 at that time the public good meant financing a war with france. over the ensuing centuries, as objectives evolved, paterson ’ s bank would have many guises including government banker, lender of last resort, bank supervisor