Criticism mounts against FSA’s stance on liquidity swaps

The FSA has blocked a number of liquidity swap transactions as it consults on the governance of such trades. But many argue that the regulator’s concerns are overblown


According to the UK’s Financial Services Authority (FSA), liquidity swaps could present a serious concern to the future stability of both the insurance and banking industries. In light of these fears the regulator has suggested that further governance requirements need to be placed upon the transactions to limit the risk potential.

But is this an overreaction? Many in the market believe that the FSA’s concerns are merely a storm in a tea-cup and that further regulation could be detrimental.


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