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.
The FSA unveiled plans to force UK banks to hold an extra £110bn in government bonds, in a bid to prevent a repeat of the banking crisis.
Liquidity requirements will be delayed to allow banks time to prepare, FSA director of prudential policy Paul Sharma said, in order to “mitigate the knock-on effects to bank lending”.
But British Bankers’ Association (BBA) executive director for prudential capital and risk, Simon Hills, said the FSA’s eagerness to be the first regulator to act risked hurting the City’s competitiveness.
“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,” he said. “We cannot put at risk the attractiveness of the UK as a centre for international finance without also risking our chances of economic recovery.”
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.”