At the beginning of June, the FSA published the third of its Consultation Papers on strengthening liquidity standards setting out its proposals for banks, building societies and investment firms. This paper embodies the transitional measures which are intended to aid the implementation of the Authority's new liquidity regime along the lines set out in the first Consultation last December and the one specifically covering reporting requirements which appeared in April.

The proposed rules are based on recently agreed international liquidity standards, in particular the Basel Committee on Banking Supervision's (BCBS) Principles for Sound Liquidity Risk Management and Supervision and also take into account difficulties faced in the market over the past two years. While it remains the responsibility of firms' senior management to adopt a sound approach to liquidity risk management, the changes proposed will, in some cases, reshape their business models.

The Authority is proposing a phased implementation plan for the elements of the new regime which will be proportionate and differentiated by class of firm. Systems and controls requirements will not have a transitional measure provided but will apply to all firms from the fourth quarter. For quantitative requirements, there will be a distinction between firms for which there will be Individual Liquidity Adequacy Standards (ILAS) and simpler firms. For the former the minimum liquidity buffer will rise in steps from 30% (Year 1) to 100% (Year 4). As the introduction of tighter liquidity regulation has the potential to undermine or dampen economic recovery, the FSA's starting point for setting individual liquidity guidance (ILG) will be the current economic position and the general liquidity position of the banking system at present.

The seriousness and speed with which the FSA intends to act on the issue are shown by the shortness of the consultation period - just two months to 31st July. In fact, it is intended to bring the new regime into effect in December 2009. This conference will take place on the eve of the first phases of implementation.
 
This event should be attended by representatives of UK regulated deposit takers (banks and building societies) including branches of overseas banks operating in the UK. It will also be relevant to non-bank securities firms, small investment firms and their advisers.

"The primary aim…a liquidity regime that, during the next long upturn, places some restraints on the expansion of balance sheets, and some restraints on the assumption of liquidity risk, such that when that next downturn comes the banks are in a significantly stronger position to be able to deal with the liquidity consequences …"
Paul Sharma, Director, Wholesale and Prudential Policy, Financial Services Authority (speaking at C&F's FSA Liquidity Policy conference on 30 Jan 2009)

Confirmed Speakers

Conference Chairman
Richard Barfield, Director, PricewaterhouseCoopers LLP

Keynote Address
David Morgan, Manager, Liquidity Policy, Financial Services Authority

Expert Speaker Panel
Timothy Buenker, Policy Advisor, British Bankers’ Association
Patrick Fell, Director, Regulatory Capital Practice, PricewaterhouseCoopers LLP
Etay Katz, Senior Associate, Allen & Overy LLP
Marcelo Scenna, Group Treasury Director, Lloyds TSB Bank
Katherine Seal, Director, London Investment Banking Association 

The Conference in Brief

• A keynote address from the FSA
• A review and reactions from representatives of the key players
• The progress of international implementation
• Liquidity standards in the broader economic context
• The legal framework underpinning the FSA liquidity regime
• The top ten actions to take in response to FSA requirements

This event is being held at:
Copthorne Tara Hotel London Kensington
Scarsdale Place, Kensington
London, UK W8 5SR
Tel: +44 (0) 20 7937 7211
Fax: +44 (0) 207937 7100
Web: www.millenniumhotels.co.uk/copthornetarakensington

Nearest Tube Station:
High Street Kensington (Circle & District Lines)

Map and Directions