No change in FSA bank law

Steve Dinneen
Follow Steve
THE Financial Services Authority (FSA) will not immediately increase the liquidity requirement for banks.

The regulatory body said it will wait until results for the first two quarters of 2010 are available before “tightening the screws” on banks.

The statement said: “The FSA believes that it would be premature to increase liquidity requirements across the industry at the current time. This position will be reviewed later on in the year with a further announcement in the fourth quarter of 2010. UK banks may be required to hold as much as £110bn in government bonds to safeguard against another credit crisis. The rules were formulated in the wake of the collapse of Northern Rock. It said increases in the liquidity requirement will be gradual and that all banks are complying with guidelines.

The FSA yesterday said it was likely to press on with plans to increase liquidity requirements even if a European directive is still being formulated. The move has angered industry sources who claim the move could mean UK banks lose their competitive edge to foreign rivals.

Analysts yesterday played down fears the decision could harm UK bond prices.