On December 4, the UK Financial Services Authority (FSA) published consultation paper CP08/22 Strengthening Liquidity Standards, proposing significant changes to its liquidity requirements for banks, building societies and investment firms.  

The proposed rules are based on the Basel Committee on Banking Supervision’s (BCBS) Principles for Sound Liquidity Risk Management and Supervision and other international agreements to address liquidity issues as a result of recent market events. The FSA proposals include: (i) a new liquidity risk management framework with greater emphasis on liquidity risk assessment and mitigation; (ii) a qualitative framework for liquidity risk management with an increased focus on stress testing and contingency funding; (iii) new liquidity reporting requirements; and (iv) a new approach for corporate groups operating in the UK.  

The consultation period closes on March 4, 2009, and new rules are expected in October 2009.