FSA publishes feedback on the liquidity requirement discussion paper
The UK Financial Services Authority (FSA) has released industry feedback to its paper on proposed changes to its liquidity policy
LONDON – The Financial Services Authority (FSA) has today published feedback on its discussion paper on liquidity requirements for banks and building societies. The paper looked at how liquidity policy should develop and focused on lessons learned following recent market conditions.
Respondents broadly agreed with the policy objectives set out in the paper. There was strong agreement on the need to continue co-ordinating the FSA’s work on liquidity both at a national level (with other authorities) and on an international level. Most respondents stated that they are reviewing their stress-testing scenarios and contingency funding plans in line with lessons learned over the past year.
The majority of respondents stressed the importance of the close relationship between the central bank’s role, actions and provisions, and firms’ internal liquidity risk management processes, as well as any measures developed by the FSA under a new regulatory regime. Respondents also agreed that quantitative requirements were a necessary component of any liquidity regime, particularly for the short term, and thought that one single quantitative regime should replace the existing three.
There was some scepticism, however, about the usefulness of quantitative requirements to safeguard against long-term chronic liquidity stresses and about the possibility of standardisation across institutions.
Paul Sharma, director of wholesale and prudential policy at the FSA, says: “We welcome the wide range of feedback we have received to DP07/7. The responses contain useful comments and suggestions, which we will consider in detail as we develop our work on a new liquidity regime. We look forward to continuing our constructive engagement with the industry and other interested stakeholders, and remain committed to full transparency throughout the ensuing consultation process.”
The FSA will consult further on all aspects of the new regime later this year, including setting out proposals on sound practices for managing liquidity risk with a strong focus on stress-testing. These enhanced qualitative requirements will reflect the work being carried out by the Basel Committee and will be the centrepiece of the new liquidity policy.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Prop shops recoil from EU’s ‘ill-fitting’ capital regime
Large proprietary trading firms complain they are subject to hand-me-down rules that were originally designed for banks
Revealed: the three EU banks applying for IMA approval
BNP Paribas, Deutsche Bank and Intesa Sanpaolo ask ECB to use internal models for FRTB
FCA presses UK non-banks to put their affairs in order
Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management