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FSA says new capital adequacy requirements will not have to be held as cash

FSA head of the RDR Amanda Bowe says the FSA’s new capital adequacy rules have been misunderstood and that capital will not have to be held as cash.

Speaking at the Sesame Symposium today, she said the paper, published later today, will be manageable for firms and based around the same RDR timetable of December 2012.

She said the capital requirements could be held in cash but also through another asset.

She said: “We are very aware of introducing new rules around capital at a time of market turmoil and difficult economic conditions will be a concern to many firms in the industry. However we do propose to introduce these in the same transition timetable that we propose with the RDR. We want to make this more manageable for firms and make it consistent with the RDR timetable.

“Some people have misunderstood the content of this capital thinking its hard cash that they need to put in a bank account they cannot touch. It isn’t. Instead the expenditure base requirement is about holding funds in liquid form to fund an orderly wind down should that be necessary. So, it can be in a bank account but also another asset.”

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