The Federal Reserve Bank of New York said money-market fund investors should be prohibited from withdrawing all their assets at once as a way to make the $2.5 trillion industry “safer and more fair.”

Money funds should set aside a portion of every investor's balance as a “minimum balance at risk” that could only be withdrawn with a 30-day notice, the New York Fed's staff said yesterday in a report. The provision would reduce systemic risk and protect small investors who don't pull out of a troubled fund quickly, according to the report.

“The delay would ensure that redeeming investors remain partially invested in the fund long enough to share in any imminent portfolio losses or costs arising from their redemptions,” the bank said today in a statement.