BlackRock, the world’s largest money manager, filed with the U.S. Securities and Exchange Commission on Friday to set up what’s known as an interfund lending program. The applicants include BlackRock Advisors and BlackRockFund Advisors, which managed gross assets of $524 billion and $863 billion, respectively, at year-end.

Larry Fink, BlackRock’s chief executive officer, said in December that U.S.bond funds face increased volatility, adding that he expected a“dysfunctional market” lasting days or even weeks within the next two years. While New York-based BlackRock has been increasing the amount of money that its funds can borrow from banks to meet temporary cash needs,the firm said in today’s application that the internal lending program mayprove less expensive and provide additional flexibility.

BlackRock fund directors “have determined that it is prudent to add new options for borrowing and lending money in case of an unexpected volume of redemptions or an unanticipated cash shortfall due to settlement failures,” the firm said in its application.

Interfund lending facilities are a “common feature” of U.S. mutual fund complexes, said Tara McDonnell, a BlackRock spokeswoman.

“As a fiduciary, we are exploring the option of extending this feature to funds managed by BlackRock,” she said in a statement. […]