View more on these topics

FSA rules aim to strengthen banks’ liquidity

The FSA is to force UK banks to invest heavily in government bonds from October 2009 to reduce lenders’ vulnerability to market conditions.

The regulator is proposing new rules that would require firms to have a higher amount and quality of liquid asset stocks, including a greater proportion held as government debt.

In its consultation paper on liquidity standards released last week, the FSA proposes an overhaul for banks, building societies and investment firms.

If implemented, banks would be forced to limit lending during favourable economic conditions to avoid “unsustainable expansion”.

Firms would need enhanced liquidity risk management capabilities, including greater use of stress testing and improved contingency funding plans.

They would also have to be less reliant on short-term wholesale funding and there will be greater incentives for firms to attract a higher proportion of retail deposits.

The proposed rules are based on recently agreed international liquidity standards, in particular, the Basel committee on banking supervision’s principles for sound liquidity risk management and supervision.

FSA director of wholesale and prudential policy Paul Sharma says: “We have put forward a set of proposals that we believe will greatly improve firms’ ability to deal with liquidity risks and thereby increase the overall stability of the UK financial markets.”


Adviser charging should be spelt out in rules

The retail distribution review’s remuneration requirements cannot be implemented successfully under principle-based regulation and must be set down explicitly in FSA rules, says Royal London head of corporate affairs Gareth Evans.

Skill bill

Ten years from now, the world we live in will be profoundly different. The way we conduct our business as providers of investments and advice will have changed.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm