The FSA has published Consultation Paper 09/13: Strengthening liquidity standards 2: Liquidity reporting (CP09/13).
CP09/13 sets out the FSA’s proposals for a new liquidity reporting regime, being part of the proposed overhaul of UK liquidity regulation, as set out in Consultation Paper 08/22: Strengthening liquidity standards (CP08/22). CP09/13 consults on proposed rules and guidance. The respondents to CP08/22 made the following key points:
- There was widespread support for the FSA’s proposals in principle, including proposed reporting frequencies, and appreciation of the goals it is trying to achieve with the new reporting regime. However, questions were raised over the FSA’s staff and systems capabilities to analyse the data it is planned to collect.
- Respondents were opposed to the FSA’s suggestion of shortening the consultation period for CP09/13 to less than three months.
- Concerns were raised over the disproportionately greater impact of the reporting proposals on smaller firms and perceived disadvantage for firms not currently asked by their FSA supervisors to complete ad hoc liquidity returns which have coverage basically similar to that proposed in CP09/13.
- There were also concerns over the proposed implementation timetable which was seen as challenging.
- The FSA’s proposals on submission deadlines were considered too tight, with reporting over weekends and same-day deadlines for crisis time reporting deemed particularly burdensome.
- Respondents stressed that quantitative reporting needed to be coupled with qualitative firm assessments and discussions to get a full and accurate picture of a firm’s liquidity risk profile.
- While many respondents noted that they were planning to automate their liquidity reporting, they also stressed that a degree of human intervention would always be necessary to ensure appropriate data verification.
- Respondents were strongly supportive of the FSA’s promoting standardised quantitative reporting internationally.
- The FSA also received comments and suggestions on currency reporting, reporting for derivatives and collateral cash flows, reporting of daily flows, data sharing and other matters.
In CP09/13, the FSA has amended its proposals on strengthening liquidity standards as follows:
- A more pragmatic, proportionate and risk-based approach to currency reporting.
- Allowing firms that are eligible and opt for the FSA’s simplified regime to report to the FSA less frequently, less granularly, and with extended submission deadlines.
- Clarifying how the FSA’s proposals on cross-border and intra-group management of liquidity, and the associated waivers and modifications, will affect regulatory reporting.
- Dropping some data items and expanding on certain others which respondents deemed important, such as derivatives cash flows and retail analysis.
- Revising submission deadlines, including weekly and crisis-time submission deadlines for daily reporting, to make them more manageable for firms.
- Rethinking the FSA’s approach to intra-day liquidity reporting, taking account of the extent to which existing information collected in this area can be harnessed to meet the FSA’s needs.
- Reassessing the implementation timetable for the quantitative reporting requirements.
Comments on CP09/13 are invited by 15 July 2009.