FSA launches review of bank liquidity requirements

The FSA says it still believes the principles-based approach to regulation is right, but say some form of quantitative liquidity requirements are still necessary. The discussion paper recommends that banks should take a ‘belt and braces’ approach to liquidity issues. The ‘belt’ is a view of all the possible demands for funds that a bank could face, such as a mass withdrawal of deposits, as well as a plan to meet any demands. Meanwhile, the ‘braces’ are defined as cash, or assets that can be turned into cash at short notice, even under difficult market conditions, giving banks additional ...