Bank of England Questions FCA Plan to Ease Capital Rules for Trading Firms
Concerns Over FCA's Proposed Capital Requirement Changes
Bank of England's Position
April 30 (Reuters) - The Bank of England has raised concerns about Financial Conduct Authority (FCA) plans to cut the capital requirements of specialist trading firms like Citadel Securities, Jane Street and Hudson River Trading, the Financial Times reported on Thursday, citing people familiar with the matter.
BOE officials, the FT said, are worried the plans could increase financial stability risks by making major trading firms less prepared to withstand a crisis.
Official Statements and Reactions
"We need to think about what incentives this [proposal] will create and what impact it will have,” one of the officials familiar with the talks told the newspaper.
Reuters could not immediately verify the report. The BOE and FCA did not immediately respond to Reuters requests for comment.
Background on FCA's Review
In December, the FCA was reviewing capital requirements for specialist trading firms including Citadel, Jane Street and XTX, citing a "real opportunity" to make rules more proportionate and enhance Britain's competitiveness.
Current Regulatory Framework
The current regime for calculating market risk capital was inherited from the European Union and designed for large, systemically important banks, an official at the FCA told Reuters in December.
Potential Impact of Changes
Updating or replacing it could free up capital for trading firms, the regulator said.
Options for Revamping Capital Rules
Revamp options ranged from tweaking the existing EU-aligned rules to an overhaul of the regime that could see Britain aligned with the U.S.' “net risk rules” approach, or using an internal model to calculate minimum requirements.
(Reporting by Preetika Parashuraman in Bengaluru; Editing by Muralikumar Anantharaman and Thomas Derpinghaus)
