FSA calls for UK banks to draw up living wills

10 August 2011

Banks in the UK could be required to draw up so-called 'living wills' that will enable them to sustain stability should another financial crisis occur.

The Financial Services Authority (FSA) has suggested lenders collate these Recovery and Resolution Plans, which will see them carry out fire sales of assets and alter their bonus plans if they experience further problems in the future.

Around six large institutions are believed to be putting the strategies together, but the FSA - which is the financial regulator for the UK - is hopeful the requirements will extend to an additional 250 banks and building societies.

Investment firms with more than £15 billion in assets will also be expected to adopt the proposals.

According to the watchdog, had banks put such plans in place prior to the recession, "they might well have been able to cope better with the stresses that developed and failures might have been avoided".

By Asim Shah

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