UK regulator 'considering further banking crackdown'

25 February 2013

Banks in the UK may need to significantly increase the amount of capital they hold in the near future, it has emerged.

Sources in the financial industry have today (25 February) told Reuters that the Financial Services Authority (FSA) is currently overseeing an investigation into how lenders go about calculating the riskiness of their lending arrangements.

The regulator is apparently determined to take a more stringent approach to its oversight of potentially hazardous internal risk models, which are having a negative impact on investor sentiment.

Over the course of the last few months, the FSA has ramped up its level of scrutiny in this area due to concerns that banks may not be setting aside sufficient funds to deal with possible losses from its mortgages and other loans.

This forms part of Europe-wide efforts to standardize guidelines for financiers on the judging of how risky loans are.

Mike Harrison, analyst at Barclays, told the news source: "It is difficult to find a smoking gun that shows banks are gaming the system. But there is an absence of proof that they are not."

By Claire Archer

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