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FSA warns firms of “substantial” liquidity cost

FSA managing director of the risk division Sally Dewar has warned that the new liquidity requirements for firms will bring “substantial” costs.

Speaking at the FSA’s liquidity conference today, Dewar said: “Clearly, the costs to put in place more robust systems for liquidity risk management and to build up liquidity buffers, are substantial. Such costs will be most significant for those firms which have had the least satisfactory arrangements up to this point.”

Dewar also said the FSA recognises the importance of agreed international standards on liquidity.

She said: “I emphasise that we strongly support the Basel Committee work to deliver improved international liquidity standards. Meanwhile, the structure of our new quantitative regime is pretty flexible and should be able to accommodate new international standards.

“And meanwhile, the new FSA qualitative standards fully implement the Basel Committee’s ‘Principles for Sound Liquidity Risk Management and Supervision’, as published in September last year.”

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