The ICI released its latest "Money Market Fund Assets" report, which says, "Total money market fund assets increased by $22.8 billion to $2.61 trillion for the week ended October 1." This was the largest increase of 2014 and the first time assets have been above $2.6 trillion since early April 2014. ICI's release explains, "Among taxable money market funds, Treasury funds (including agency and repo) increased by $28.56 billion and prime funds decreased by $6.52 billion. Tax-exempt money market funds increased by $810 million. Assets of retail money market funds increased by $2.41 billion to $903.11 billion. Among retail funds, Treasury money market fund assets increased by $740 million to $200.31 billion, prime money market fund assets increased by $2.14 billion to $518.35 billion, and tax-exempt fund assets decreased by $470 million to $184.44 billion. Assets of institutional money market funds increased by $20.42 billion to $1.71 trillion. Among institutional funds, Treasury money market fund assets increased by $27.82 billion to $758.07 billion, prime money market fund assets decreased by $8.67 billion to $881.82 billion, and tax-exempt fund assets increased by $1.28 billion to $71.09 billion." In other news, the International Monetary Fund (IMF) published a report entitled, "Shadow Banking Is Boon, Bane for Financial System." It says, "Shadow banks act similarly to regular banks by taking money from investors and lending it to borrowers, but are not governed by the same rules or supervised. Shadow banks can include financial institutions such as money market mutual funds, hedge funds, finance companies, and broker/dealers, among others. The IMF's latest Global Financial Stability Report analyzes the growth in shadow banking in recent years in both advanced and emerging market economies and the risks involved. According to the report, shadow banking amounts to between 15 and 25 trillion dollars in the United States, between 13.5 and 22.5 trillion in the euro area, and between 2.5 and 6 trillion in Japan. "We found that the same factors often seem to drive the growth of shadow banking across countries," says Gaston Gelos, chief of the Global Financial Analysis Division at the IMF. "Shadow banking tends to take off when strict banking regulations are in place, which leads to circumvention of regulations. It also grows when real interest rates and yield spreads are low and investors are searching for higher returns, and when there is a large institutional demand for 'safe assets,' for example from insurance companies and pension funds." As the global financial crisis has shown, there are also risks associated with shadow banking due to their reliance on short-term funding, which can lead to forced asset sales and downward price spirals when investors want their money back at short notice."
