The proposals come as a direct result of the financial crisis and in particular the collapse of Lehmans. If passed banks will have to increase their daily reporting to clients and restrict the amount of client’s money held on the investment bank’s own account to 20 per cent. The FSA believe this will limit the amount by which a client is exposed to group credit risk.
Investment banks must also appoint a senior individual within the firm who should be responsible for the protection of client assets.
“The aim of the consultation is to ensure that clients have confidence their money and assets are safe and will be returned within a reasonable timeframe in the event that a firm becomes insolvent,” the body said.
Paul Sharma, FSA director of prudential policy said the consultation sets out ways to protect clients.