New FSA rules demand more capital; banks protest

The UK Financial Services Authority has published new rules governing funding standard at lenders.

As per FSA lenders should hold assets which are truly liquid like government bonds.

But, the British Bankers' Association fears that the new rules would jeopardize UK's attractiveness as a centre for international finance.

Speaking on the issue, British Bankers' Association' Simon Hills said, "The FSA must avoid at all costs choking off economic recovery by curtailing banks' ability to lend."

According to an estimate, the introduction of new regime would require lenders to increase their collective holdings of government bonds by £110 billion, or an annual cost of about £2.2 billion.

In addition, the introduction of new rules will avert lenders from holding anything but easily saleable govt. debt plus customer deposits.

The introduced rules require up to 500 lenders to send in weekly liquidity reports.