FSA has published a new consultation on strengthening capital standards. This consultation looks at changes to FSA rules necessary to implement CRD changes. The changes include:

  • hybrid capital: establishing clear EU-wide criteria for assessing eligibility of hybrid capital based on permanence, flexibility of payments and loss absorbency;
  • trading book: ensuring risk assessments reflect potential losses from adverse market movements;
  • large exposures: restricting lending above a certain level to any one party;
  • securitisation: improving risk management including requiring originators to retain an economic interest in any securitisation a firm invests in;
  • re-securitisations: introducing higher capital requirements for firms that invest in these; and
  • disclosure: upgrading of standards.

The consultation includes a set of draft new rules, including on Pillar 3. FSA wants comments by 10 March. It will make the rules later in 2010 because they must take effect by 1 January 2011.