We find such elements of pro-cyclicality in the set of prudential rules for banks as well as for insurance companies. We find pro-cyclicality in the accounting rules. We find elements of pro-cyclicality in the attitude of the authorities that can, paradoxically, apply more rigorously their rules and regulations in times of difficulty while they were nonchalant during the previous boom episodes.
We need to look in particular at whether investors conceive money market funds as equivalent to deposit accounts. And if so, whether money market funds have the resilience to meet the consequent liquidity demands in the event of severe stress. This work will soon be followed by ongoing efforts focused on other open-end funds, margining and bond market structure, and liquidity.