FSA to alter bank liquidity guidance

2 July 2012

Bank liquidity guidance is to be altered in light of the improved insurance being offered by the Bank of England.

This is the announcement from the Financial Services Authority (FSA), which remarked certain lenders will have their arrangement changed on "appropriate levels of liquid asset buffers."

Any bank that has pre-positioned collateral at the Bank will be treated differently by the FSA because of their potential to access liquidity from it.

"This adjustment reflects the increasing degree of contingent liquidity insurance which the Bank of England will now provide," the body remarked.

It went on to note lenders will not be impeded in their efforts to support the real economy.

The measures are in line with recommendations made by the Financial Policy Committee and details will be discussed on a case-by-case basis.

In 2013, the FSA is going to be replaced by the Financial Conduct Authority and Prudential Regulation Authority.

By Gary Cooper

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