Earlier in the month, the Financial Services Authority relaxed capital and liquidity rules – risky business, or a surefire way for growth?
Earlier in the month, the Financial Services Authority relaxed liquidity and capital rules for banks, in a bid to help stimulate lending in the sluggish economic climate in the UK.
While these new policies had been established earlier in September, there has been some brouhaha in response to what some see as mixed messages from regulators, as well as calls for more capital to be extended to banks.
Financial commentator Ian Fraser sees these changes in capital rules as being a massive u-turn for the FSA, and believes that the FSA is playing a dangerous game by relaxing these rules.
“In broad terms, the moves seem a massive u-turn for the regulator, chaired since 2008 by Lord Turner” Mr. Fraser said, in regards to these capital changes.
“Until now, all the talk from the Bank of England in Threadneedle Street and the FSA in Docklands has been that banks must further bolster their capital ratios — especially in view of the risk of a disintegration of the eurozone.”
The impact of these regulatory changes will not be seen until after the new year. By then, it will be evident if the FSA has succeeded in stimulating consumer spending and business growth, by allowing lenders flexibility in the amount of capital they’re required to hold.
How do you feel these changes will affect the economic climate come the new year?
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