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FSA to consult on changes to disclosure and transparency rules

The Financial Services Authority will consult on a proposal that financial institutions who receive liquidity support from a central bank will have a legitimate interest for delaying the public disclosure of such support.

This follows two consultation documents published earlier this year by the regulatory body, the Bank of England and the Treasury into the issue.

Under the EU’s market abuse directive from which the disclosure rules are derived, firms admitted to trading on a regulated market are obliged to publicly disclose inside information to the market. The directive allows, in certain specific circumstances, the disclosure of inside information to be delayed.
FSA proposals state that a financial institution in receipt of liquidity support from a central bank may have a legitimate interest to delay the disclosure of such support. It says that immediate disclosure could, by leading to a loss of confidence among consumers, exacerbate the existing liquidity problems and threaten the solvency of the financial institution.

FSA says: “The proposal would not grant a financial institution an unconditional or indefinite delay to disclose the receipt of liquidity support. Under certain circumstances, immediate disclosure would still be required.”

Consultation on these changes will close on September 30 2008.

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