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Abstract
The UK Financial Services Authority (FSA) is moving forward at breakneck speed with new liquidity rules for domestic financial institutions and UK-based branches of foreign banks. Of all the areas covered -- ranging from a requirement to hold a buffer of liquid assets, to better stress testing and planning for funding gaps -- it is the reporting requirements that are proving to be most operationally burdensome for banks. The rules represent a sea change for those institutions that have never before taken an enterprise-wide view of their liquidity position. The FSA counters it has already demanded similar information from the largest UK banks. Some market participants, however, question whether the FSA requirements will really drive the adoption of ERM systems. It may make good sense in theory to take more of an enterprisewide view of risks, but such technology is both costly and time-consuming to implement.