The FSA have now issued their long awaited policy statement on the liquidity regime, and although much of the regime remains, there have been some positive developments have arisen.
Smaller full scope BIPRU firms, such as stockbrokers or broker dealers, will no longer be required to comply with the quantitative aspects of the regime, known as the Individual Liquidity Adequacy Standards. Those coming under the FSA’s definition of ‘smaller’ will be those with total assets less share capital, minority interests and reserves of less than £50 million.
Larger investment firms may also have benefited from the finalised regime. Full scope BIPRU firms with total assets of less than £1 billion will now be subject to a low frequency reporting schedule which will see some reporting being reduced from daily to weekly and others from weekly to monthly, which will again further reduce the resource requirements needed to comply with the regime.
All firms still need to ensure they have the appropriate systems and controls in place by 1 December 2009, including having suitable liquidity risk management policies and procedures, adequate liquidity stress testing and contingency funding plans in place. So for those who have not yet considered the implications of the new regime on their firms, the clock is now ticking.
We would encourage all firms affected by the regime to begin working on the impact of this as soon as possible. This should include BIPRU Limited Licence and Limited Activity firms, because although such firms are only affected by the systems and controls aspects of the regime, there may still be significant revisions to policies and procedures required to bring them in line with the prescriptive measures included within the FSA’s proposals.
Our approach is to help firms to consider the implications of the new regime, using gap analysis and other techniques to identify critical gaps to be assessed and analysing the most cost efficient means to achieve compliance.
If you require clarification on how this legislation will affect you and advice on the best action to take please contact your local BDO Partner, or Fiona Raistrick who leads BDO’s Financial Services Regulatory Practice.