Morgan Stanley clients withdrew almost one-third of their cash from money-market accounts in September, forcing the Wall Street bank to buy $23 billion of securities held by the funds to keep them afloat, according to Bloomberg.

Redemptions were $46 billion in September, mostly from funds that invest in corporate debt, Morgan Stanley said in a 9 October regulatory filing. The company made sure the money-market funds had enough cash to repay investors by acquiring some of their assets with financing from "various available stabilization facilities".

Morgan Stanley may have relied on one or more programmes set up by the Federal Reserve in the past month to prop up the $3.54 trillion money-market fund industry, Bloomberg quoted analysts as saying. The Fed has taken steps to restore investor confidence shattered by losses last month at the Reserve Primary Fund, the oldest US money-market fund.

Morgan Stanley bought the fund assets to "ensure that redemption obligations were met amidst illiquid trading markets", Morgan Stanley said. The Fed declined to comment.

Individuals and institutions use money-market funds to earn a yield until the cash is needed. They are considered the safest investments after bank deposits and government bonds partly because they buy only highly rated fixed-income securities with an average maturity of 90 days or less. That reputation was undermined by the 15 September bankruptcy filing of Lehman Brothers.

The following day, the $62.5 billion Reserve Primary Fund said it wrote down to zero the value of $785 million of debt issued byLehman Brothers. That caused its asset value to fall below the $1-a-share purchase price, the first money-market fund in 14 years to break the buck. New York-based Reserve Management Corp froze the fund.

Lehman’s demise also raised fears about the value of financial products sold to wealth management clients such as structured products. The credit crunch has put a harsh spotlight on counter-party risk.