First man in

5 October 2009 By George Hay Follow @gfhay

The FSA s funding reforms might appear vague detail on banks targets and timescales remains sparse. But it deserves credit for being the first G20 regulator out of the blocks. And with further crackdowns to come, it’s wiser not to commit to anything too specific.

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Tighter liquidity regulation could cost the UK banking sector £2.2bn a year, according to figures revealed on October 5 by the Financial Services Authority.

The number formed part of the UK regulator's concrete proposals intended to make bank funding safer. The FSA will test how each bank's liquidity profile performs under stressed conditions.

Each bank will then be set a target for the proportion of deposits in its funding mix, and of easytosell gilts.

The £2.2bn forecast is based on UK banks extending the maturities on 20% of their shortterm wholesale funding, and covering 60% of what they would have to fund themselves under an extreme stress test.

The number will change depending on what level of safety the FSA decides to enforce. If banks did not change any of the maturities on their funding and covered all the outflows, the cost would be £9.2bn a year.

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