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UK‘s FSA accused of inadequate liquidity risk communications


UK’s FSA accused of inadequate liquidity risk communications

Independent think-tank queries why yet another important announcement is quietly released despite initial compliance deadline being less than four months away

London – 8 June 2009.  The FSA’s latest paper on its data-intensive liquidity risk regime was quietly posted on their website on Friday evening.  Consultation Paper (CP) 09/14: Strengthening liquidity standards 3: Liquidity transitional measures, sets out the FSA’s proposals for transitional measures which are intended to aid the implementation.  This relates to a significant piece of regulation which will have major consequences for banks operating in the UK and there is less than four months for the industry to be ready. 

PJ Di Giammarino, CEO of the independent think-tank JWG-IT, comments: “Despite the requirement for granular, fast moving quantitative and qualitative liquidity data to be passing between senior executives across the bank by the end of this summer, you could have blinked and missed the publication of this Consultation Paper altogether.  It is genuinely surprising to see the FSA so quiet in their announcement of what is required to do this implementation right.

“The FSA may not have widely communicated the requirements of this regulation, but the agenda should still be taken seriously by the board and senior execs.  In our discussions with banks, we have found that, whilst treasury and CRO functions have understood the impact of the new regime, the operations and technology functions have not yet realised what it means for them.  Board members should be asking themselves whether they feel ready for this new level of inspection around how the bank is run.”

Di Giammarino continues: “Many have been awaiting certainty and were hoping for global discussions to soften the requirements from this regime.  It is now clear that this is not going to happen. The industry is still largely shell-shocked, yet the FSA has just said that there could be as few as 75 working days until it needs to start testing the massive new requirements that were laid out 6 months ago. 

“The 65-page paper has ignored previous cries for implementation certainty in time for critical redevelopment of business and technology systems. It has dodged the fundamental issues of how much the new regime will cost, how the industry will develop standardised views of the data required and what ‘good implementation’ looks like.  The paper instead stresses the need for systems and controls which will need to be implemented this summer in order to be through testing by the fourth quarter 2009.”

 “Given the enormous implications for the banks’ infrastructure and supply chain, putting the new controls in place is far from a simple exercise.  The robustness of the bank’s data integration, analytics and reporting - in advance of the FSA’s visit - will make or break the management team when they are tested on how well they have taken the new regime to heart.”

“Despite the surreptitious nature of the message, we are clearly in ‘damn the torpedoes, full steam ahead’ mode.  Although, how the industry can be expected to spring into action globally with this level of awareness is a mystery.”

The consultation period for 09/14 will be open for eight weeks until 31 July and the document reiterates that the FSA will publish the Policy Statement, which defines the final reporting rules and transitional arrangements, in the third quarter of 2009.

JWG-IT’s liquidity risk action network (LiRAN) has been working with the banks and their suppliers to understand the firms’ implementation issues and is hosting a series of implementation workshops for practitioners in banks.  For background information on liquidity risk requirements see: www.liquidity-risk.info  or www.jwg-it.eu  where analysis reports are available to download.

About JWG-IT Group Limited

JWG-IT is the only financial services industry think-tank to facilitate collaborative work to resolve industry issues created by regulatory change.  Based on a working model started in 2005, JWG-IT has established strong relationships with EU administrators, leading firms and companies.  It is neither lobbyist nor consultancy and revenues are restricted to membership and event fees and content sales.  The JWG-IT Think-Tank is designed to help members and participants manage regulatory-driven change better, quicker, cheaper and with less risk.  JWG-IT launched the customer data management group and the liquidity risk action network in 2008.  For more information, see www.jwg-it.eu.

For immediate release

PJ Di Giammarino, pj@jwg-it.eu, +44 (0) 7811 430 503

Louisa Excell, Louisa.excell@hotwirepr.com +44 (0) 20 7608 2500



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