andrew bailey : taking our second chance to make mmfs more resilient speech by mr andrew bailey, governor of the bank of england, at the international swaps and derivatives association ( isda ) 35th annual general meeting, 12 may 2021. * * * introduction thank you for inviting me to speak today. i want to start by thanking isda for the important work you do, and in recent times particularly scott o ’ malia and his colleagues for working with central banks and regulators to manage the transition away from libor. your support on this complex transition has been hugely important. you may be relieved to hear that i am not going to talk about libor today. i did speak on the subject yesterday, it ’ s on the bank of england ’ s website if you are interested ( bailey, 2021 ). instead, i am going to speak about another important part of our current work and a priority for the global financial stability board ( fsb ), namely money market funds ( mmfs ). the fsb analysed last march ’ s so - called “ dash for cash ” in their holistic review published at the end of last year, highlighting a number of vulnerabilities in non - bank finance and setting out some considerations for reforms required to tackle the issues we saw in that episode ( fsb, 2020 ). mmfs were one of the issues at the top of that list. mmfs also played a role in amplifying the stress we saw during the global financial crisis, so this is the second time they have proven not to be sufficiently resilient. i plan, therefore, to set out my views today on the reforms required to solve these issues. we are committed to working with others internationally, through the fsb, to avoid history repeating itself yet again. background to the issues posed by mmfs in talking about money market funds, it is important to put them into a wider context. several aspects of that context are important, including : their historical origins, the role they played in amplifying stresses in the global financial crisis, the direction of reforms following that episode, and the position of the funds relative to both banks and the broader investment fund landscape. to start, briefly, with some history. in the us, money market funds emerged in the 1970s when regulation capped the interest that banks were allowed to pay on deposits at a level below money market yields. money market funds were set up to mimic bank deposits by maintaining a stable value of

, cpi inflation is as low as it ’ s been for four years. in terms of growth, the obvious question this raises is, why now? why, after throwing everything bar the kitchen sink at the economy over the past few years, has the economy started to grow only now? even more importantly, will the recovery last? having seen a few false dawns over recent years, has the recovery really taken hold this time? and what does all this mean for monetary policy. in particular, what does the mpc ’ s so - called forward guidance, which we announced in the summer, mean for you – the businessmen and women driving this recovery? and that ’ s the plan for today : to consider three key questions about the economic recovery that we ’ re now finally enjoying – why now, will it last, and what next for policy? securities and investment review, september 1993. bis central bankers ’ speeches why now? first, why now? why after several years of frustration and disappointment has the economy begun to grow? it ’ s hard to be certain : this time last year we were not predicting such a sharp turnaround in growth and there ’ s a danger of appearing to be wise after the event. but, at least with the benefit of hindsight, two developments in particular seem important in driving the turnaround : an easing in credit conditions ; and a reduction in economic uncertainty. let me say a few words about each, starting with credit conditions. improved credit availability although it ’ s still patchy and there ’ s further to go, we ’ ve observed a marked improvement in the ability of many companies and households to access credit over the past 18 months or so. some of that stems from a lessening of tensions within the euro area, which has helped to ease pressures on banks both sides of the channel. it ’ s also been aided by domestic polices, including the funding for lending scheme, a series of regulatory actions to improve the strength and resilience of our banking system and, more recently, the government ’ s help - to - buy policies. i fully recognise that the ability of many smes – perhaps many of you here today – to access credit at reasonable rates still remains impaired. but even here my sense is that some progress has been made. that ’ s the message from surveys of small businesses, from reports by the bank ’ s agents, and indeed that i get from my own conversations with many businesses around the country. we ’ re not there