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Regulation > Consultation Paper 08/22 Strengthening liquidity standards December 2008

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Published: 31st January 2009 by William Webster

This CP sets out the FSA's plans to reform the liquidity regime. It requires firms to undertake a much more rigorous analysis of their liquidity position. This includes the effect of stressed conditions on their business. The firm will submit what it considers to be an appropriate liquidity buffer to the regulator. The FSA will then decide whether it is sufficient. In determining the buffer the FSA will also assess the firm's systems and management. If these are considered weak the buffer will be increased accordingly. The liquidity buffer can only be held in liquid assets. The FSA's view is that this primarily means Gilts, sovereign debt or central bank deposits.

The FSA makes it clear, "The responsibility of adopting a sound approach to liquidity risk management is on firms and their senior management".

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