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FSA WARNED ON LIQUIDITY PLAN

THE Financial Services Authority (FSA) was told yesterday that its new liquidity rules could put London at a competitive disadvantage.<br /><br />The FSA unveiled plans to force UK banks to hold an extra &pound;110bn in government bonds, in a bid to prevent a repeat of the banking crisis.<br /><br />Liquidity requirements will be delayed to allow banks time to prepare, FSA director of prudential policy Paul Sharma said, in order to &ldquo;mitigate the knock-on effects to bank lending&rdquo;.<br /><br />But British Bankers&rsquo; Association (BBA) executive director for prudential capital and risk, Simon Hills, said the FSA&rsquo;s eagerness to be the first regulator to act risked hurting the City&rsquo;s competitiveness.<br /><br />&ldquo;No other regulator has yet created such a far-reaching liquidity regime, yet we are constantly assured at global meetings of the G20 and others that effective change needs international consensus,&rdquo; he said. &ldquo;We cannot put at risk the attractiveness of the UK as a centre for international finance without also risking our chances of economic recovery.&rdquo;<br /><br />But Patrick Fell, director in financial services regulatory practice at PricewaterhouseCoopers, said: The interpretation on the ground will be what matters. There is a real need to regulate as a worldwide entity.&rdquo;