Financial reform has reduced funding risks associated with banks and money market funds. Large banks subject to liquidity regulation rely less on unstable short-term wholesale funding and have thicker liquidity buffers.
As a result of money market reforms, investors have migrated toward government-only funds, which pose low run risk, and away from prime institutional funds, which proved highly susceptible to runs during the crisis and required extraordinary government support (figure 5). In contrast, we are seeing elevated vulnerabilities in the nonfinancial business sector.