FSA holds fire on enhanced liquidity regime

by Gill Montia

Story link: FSA holds fire on enhanced liquidity regime

The Financial Services Authority (FSA) is holding fire on its enhanced liquidity regime, which aims to ensure financial firms’ capital buffers reflect the lessons of the credit crisis.

The details of the regime were published in October 2009, but the regulator says economic recovery needs to be assured before they can be implemented, given that all firms have been experiencing market-wide stress.

This position will be reviewed later on in the year, with a further announcement in the final quarter of 2010.

Meanwhile, the FSA will continue to work with firms that are most affected by the new regime, “focusing on the steps they are taking to mitigate liquidity risk”.

Specifically, the new rules include: An updated quantitative regime coupled with a narrow definition of liquid assets; over-arching principles of self-sufficiency and adequacy of liquid resources; enhanced systems and controls requirements; granular and more frequent reporting requirements, and a new regime for foreign branches that operate in the UK.