The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Regulation: UK FSA jumps the gun on liquidity

Plans on hold until recovery assured; Eligible asset limitations anger banks

The UK’s Financial Services Authority stoked controversy last month with the announcement of its new rules on UK bank liquidity. Perhaps conscious of the stinging criticism it attracted for its light-touch regulation before the crisis, the FSA is first out of the gate among the main regulators on liquidity changes.

Under the new rules banks must hold a buffer of easily saleable securities. These should be unencumbered, banks will have to test market liquidity by periodically churning the buffer and liquidity management will be separated at entity level – requiring each subsidiary to be self-sufficient.

"In the current crisis some firms weathered the storm better than others," commented FSA director of prudent policy Paul Sharma. "These firms tended to be those that had policies that are similar to those that we are introducing – including holding assets that were truly liquid, such as government bonds."

Criticism
The narrow definition of eligible liquid assets (high-quality government bonds, central bank reserves and bonds issued by multilateral development banks) has drawn criticism from the industry. "We would have liked to have seen a broader definition of a liquid asset buffer (LAB)," says Tim Buenker, policy advisor at the British Bankers’ Association (BBA).

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree