RWP-xx, month/year

In this paper, we present empirical evidence of the regulatory dialectic in the prime institutional money market fund (PI-MMF) industry. The regulatory dialectic describes how banks and regulators react to each other. For decades, a cap on commercial deposit interest rates fueled dramatic growth in bank-sponsored PI-MMFs as a form of shadow banking. During the growth period, banks with more commercial deposits were more likely to enter the PI-MMF industry in an effort to keep their commercial customers in affiliated subsidiaries. However, the 2008 crisis and subsequent regulatory changes halted the rapid growth of PI-MMFs. In the post-crisis regulatory regime, bank-sponsored funds were more likely to exit the industry than nonbank-sponsored funds. Simultaneously, the industry shifted from PI-MMFs to government institutional MMFs as substitute products.

JEL Classifications: G2, G21, G23, G28, H12, H81

Article Citation

  • Jacewitz, Stefan, Jonathan Pogach, Haluk Unal, and Chengjun Wu. 2023. “Explaining the Life Cycle of Bank-Sponsored Money Market Mutual Funds: An Application of the Regulatory Dialectic.” Federal Reserve Bank of Kansas City, Research Working Paper no. 23-XX, November. Available at …


Stefan A. Jacewitz

Research and Policy Officer

Stefan Jacewitz is a Research and Policy Officer at the Federal Reserve Bank of Kansas City. He joined the Economic Research Department in April 2021 after serving 12 years at th…