Jan 18 2008 Peter Elstob
The Financial Services Authority has signalled that it will be collecting liquidity information from all banks operating in London, including some non-European Economic Area banks which have hitherto enjoyed a partial exemption.
Collection of liquidity data is done by means of a new form introduced last year, Form FSA044. Simon Hills, of the British Bankers' Association, told Complinet that the BBA was currently making its members aware of the new development.
Liquidity risk management is normally one of the areas that is still host-state regulated, based on the principles of mutual recognition and allocation of tasks between home and host regulators. Hills noted: "Almost alone among regulators, the FSA has been saying to foreign banks operating in the UK, 'If you can convince us that your home regulator has a good handle on your liquidity here in the UK, we'll give you a global liquidity concession. So you won't have to report to us on liquidity, but perhaps we'll have conversations with you from time to time.'"
In its quarterly consultation, however, the FSA said (paragraph 6.5) that it was "now consulting on expanding the [liquidity] reporting population to include non-EEA banks and EEA banks that have permission to accept deposits in the UK, other than those with permission for cross-border services only. We propose to collect the data for all such firms, including those which have global liquidity concessions."
Paul Sharma, head of risk review at the FSA, said that the move was part of a wider process of improving the regulator's information on banks' liquidity. It did not represent a change in the FSA's attitude to home regulators' liquidity supervision. "What it does is allow us to understand better what is going on. But the current idea — that, for some banks, in terms of the liquidity requirements, we would defer to the home state — remains," he told Complinet.
