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.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
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. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Adapting FRTB strategies across Apac markets
As Apac banks face FRTB deadlines, MSCI explores the insights from early adopters that can help them align with requirements
Republican SEC may focus on fixed income – Peirce
Commissioner also wants a revival of finders’ exemption, more guidance for UST clearing
Streamlining shareholding disclosure compliance
Shareholding disclosure compliance is increasingly complex due to a global patchwork of regulations and the challenge of managing vast amounts of data
Banks take aim at Gruenberg’s brokered deposit rule
Regulatory lawyers question need to reverse 2020 rulemaking just four years later
Time running out to backload Emir derivatives reporting
Significant slice of legacy trades still not ready for new formats, as October 26 deadline looms
Gensler to stick to Treasury clearing timetable
SEC chief promises to keep up the pressure for done-away trades
Clearing houses fear being classified as Dora third parties
As 2025 deadline looms, CCP and exchange members seek risk information that’s usually deemed confidential
Citizens’ growth won’t bow to regulatory thresholds, CRO says
Risk Live: Bank faces stricter capital and liquidity requirements if it crosses $250 billion in assets