Institutional Dependence and Systemic Risk in Modern Money Markets

The money market represents a key segment of the financial system, ensuring short-term capital allocation, liquidity, and the transmission mechanism of monetary policy. Although it is traditionally perceived as an example of the “free market,” empirical evidence and current trends demonstrate that regulatory frameworks, institutional safeguards, and trust in state and banking institutions condition its stability. This article analyzes the main money market instruments: Treasury bills, commercial paper, repurchase agreements, banker’s acceptances, and Eurodollars, and highlights their dependence on regulation and the solvency of issuers. Particular attention is devoted to systemic risk, moral hazard, and the concentration of power (“too big to fail”), which challenge the sustainability of the self-regulating market ideal in a globalized economy. In addition to global analysis, regional perspectives from Central Europe (Slovakia) and Central Asia (Uzbekistan) are considered, illustrating how institutional frameworks shape money-market stability across diverse contexts. An empirical illustration of Treasury bill yields confirms that prices and interest rates are shaped by central bank monetary policy rather than spontaneous market equilibrium. The conclusion emphasizes the need for a macro-prudential regulatory framework that fosters transparency, protects smaller participants, and minimizes systemic risks. Regulation thus appears not as a restriction, but as a necessary precondition for the stability and efficiency of the money market in the 21st century.

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