Liquidity swaps face uncertain future as FSA consults on risk management

Liquidity swaps face uncertain future as FSA consults on risk management

FSA Canary Wharf

Firms looking to undertake liquidity swap transactions could face tough new regulatory requirements if FSA proposals, set out in a recent consultation paper, are carried out.

Liquidity swaps provide banks with the opportunity to exchange illiquid assets, such as asset-backed securities, with the liquid assets held by insurance companies for a fee in order to satisfy regulatory liquidity requirements.

In its consultation, which closed on September 21, the UK regulator highlighted the potential

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