what amounted bis central bankers ’ speeches to russian doll shadow banking – a money fund buys short - term abcp backed by cdos, etc. what i suggest here is that : money market funds should be required to choose between being – variable net asset value ( nav ) funds or constant nav funds – any remaining cnav funds should be subject to capital requirements of some kind – all should be subject to “ gates ” or other measures that can be used to delay withdrawals, to make runs less likely. that package would not completely prevent runs ; regular mutual funds can suffer runs. but it would make them somewhat less brittle. europe should want a global standard or at least a globally consistent approach to money funds. much the largest money - fund industry in the world is based in the us. but it is not confined to domestic, us intermediation. it is internationally active – lending to banks, corporates and sovereigns around the world. that underlines the importance of the outcome of the deliberations of the sec and of the us financial stability oversight counsel in this area. we have to hope that the us authorities will take action – making not only their own domestic financial system safer, but the global system safer. if, against our hopes and expectations, that proves not to be the case, authorities in europe and elsewhere will need to think through what if any measures we could sensibly take to make our part of the global financial system more resilient to the faultline that the money fund industry currently represents. one possibility would be for bank supervisors to limit the extent to which banks could fund themselves short - term from us money funds and from other fragile / flighty sources, including cnav money funds domiciled elsewhere. i should stress that such a policy need not be targeted at us funds per se. it is also a question of the prudence of the banks that borrow. so it could be cast in terms of the liability structure and sources of funding of the banking system. the basel 3 net stable funding ratio may help a bit with this. and i should add that on some fronts – notably transparency – europe should aim to catch up with the progress the us has already made. securities dealers, finance companies some shadow banks are “ businesses ”, not funds or vehicles. these non - bank financial intermediaries finance themselves externally in the markets. some such financing is short - term and so effectively runnable, as events showed. in those cases : if they

financing markets. ( that would be helpful for market participants themselves ). financial firms and funds should not be able to lend against securities that they are not permitted or proficient enough to hold outright. non - bank financial firms should be regulated in how they employ cash collateral. the authorities should be able to step in and set minimum haircut or margin levels for the collateralised financing markets ( or segments of them ). ( that would need to be pursued at international level. 3 it might be linked to central bank haircuts ). some of those points are aired in the fsb ’ s report on securities lending and repos published today4 and will, i hope, be explored intensively in the coming months. i will expand slightly on the last point in my list. the amount of leverage available in the system depends, of course, to a significant degree on the haircuts applied in chains of secured financing transactions ; leverage is the reciprocal of the haircuts. the resilience of the system is therefore impaired when a bout of exuberance drives down haircuts. the authorities need to be ready to place constraints on that – through minima that either apply continuously or are specially introduced when conditions are overheating. there is already an official exercise underway to frame the determination of minimum margin levels in the parts of the derivatives market that will not be centrally cleared. at some point down the road, this will need to be brought into a coherent framework with any measures on the collateralised - financing market. doing so would require deciding whether to apply the same or different approaches to the inter - dealer market and dealer - customer transactions. conclusion : innovation, evolution and surveillance those are just a few thoughts for debate, based on some current manifestations of shadow banking. i have not even covered the existing waterfront. for example, we need policies on those levered credit funds that offer near - instant withdrawal rights. in the eu distinctions need to be made within the alternative investment fund managers directive and ucits regime, which allows risky structures to be branded as retail products. but it would be foolhardy to imagine that we can frame policies today that will stand the test of time. the financial system will evolve, and we need to permit innovation. a policy framework on shadow banking therefore needs to be adaptive. and it mustn ’ t try to shut see committee on the global financial system, “ the role of margin requirements and haircuts in procyclicality ”, march