Update on the liquidity market place
It's been nearly a year now since the "Strengthening liquidity standards" paper PS09/16 was released by the FSA. In that time, the Bank for International Settlements (BIS) has issued its own interpretation and the FSA has refined its rules. What has not altered is the timing or the FSA’s stance on compliance. On October 1st institutions impacted by the regulations will have to confirm to the FSA that they will be able to comply with the first reporting date at the end of that month. With just a few days to go just how many are in a position to make that statement?
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Where is the market now?
Mark Piper, VP of UK, Ireland and MEA for FRSGlobal explains; “The “systemic institutions” (i.e. those institutions that would have major impact in the event that they were to default) have of course already started to report liquidity under the terms of PS 09/16, but the rump of the market is due to commence reporting in October and November this year (2010).
One might have thought that Individual Liquidity Adequacy Standards (ILAA) would have been well and truly put to bed by now, but, but based on the enquiries FRSGlobal has been receiving from all types of institutions, some are clearly behind the curve on this issue. On the basis that stress testing policy feeds into the ILAA, it is safe to assume that those institutions may also be behind the curve on this issue and that of the subject of identification of the data requirements and ultimately, implementation.
Feedback from FRSGlobal clients and prospects tells us that the FSA is starting to bear down on institutions - asking them the key question “are you going to be ready to meet the deadline we have imposed on you?” What we don’t know is just how many institutions have been able to put hand on heart and answer positively.
What has been learnt so far this year?
Beware of regulators bearing modifications – February 18th 2010. Are waivers/modifications a true "Get out of jail free"” card? – We’re not really sure, what we do know is that whilst the vast majority of UK branches have requested waivers, some have chosen not to go that route. We don’t have enough feedback yet to establish whether, in the main, the FSA has granted waivers when requested, but we assume from the lack of protestation that this is generally the case.
As we know, all that a waiver really does is to transfer the pain to another part of the group. We predict that there will be an upsurge of interest in other countries around liquidity requirements and discussion around how to satisfy at least two (and more in the case of multi-national institutions) interpretations of liquidity policy.
