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I'm certain that these new liquidity rules are being put in place solely to ensure bank safety and soundness and have absolutely nothing to do with helping the BoE monetize debt.
http://www.marketwatch.com/story/us-...14?siteid=nbsh
http://www.marketwatch.com/story/us-...14?siteid=nbsh
LONDON (MarketWatch) -- Controversial new U.K. rules that require banks to hold more cash and government bonds could end up costing U.S. and European financial institutions dearly as well.
Many countries are looking at tougher liquidity rules, but the U.K.'s decision to move before an international consensus has been reached, and to apply its rules widely, could cost U.S. and European firms "potentially billions of dollars," said Simon Morris, a partner at law firm CMS Cameron McKenna in London.
The Financial Services Authority's rules, which were finalized last week, will ensure banks hold more highly liquid assets, meaning they should still be able to sell them even during a financial crisis. That's important because many troubled firms found themselves unable to offload assets during the crisis, adding to the problems.
The exact requirements will vary from firm to firm, but the new rules could require U.K. firms and banks to hold an extra 110 billion pounds of government bonds in the first year, resulting in an annual cost of around 2.2 billion pounds due to the lower yield on government debt than on other assets.
...
The requirements don't demand that the government securities are exclusively from the U.K., but one side effect will be an increased demand for U.K. issues, known as gilts, just as the Bank of England's quantitative easing program under which it is buying up 175 billion pounds of gilts.
Many countries are looking at tougher liquidity rules, but the U.K.'s decision to move before an international consensus has been reached, and to apply its rules widely, could cost U.S. and European firms "potentially billions of dollars," said Simon Morris, a partner at law firm CMS Cameron McKenna in London.
The Financial Services Authority's rules, which were finalized last week, will ensure banks hold more highly liquid assets, meaning they should still be able to sell them even during a financial crisis. That's important because many troubled firms found themselves unable to offload assets during the crisis, adding to the problems.
The exact requirements will vary from firm to firm, but the new rules could require U.K. firms and banks to hold an extra 110 billion pounds of government bonds in the first year, resulting in an annual cost of around 2.2 billion pounds due to the lower yield on government debt than on other assets.
...
The requirements don't demand that the government securities are exclusively from the U.K., but one side effect will be an increased demand for U.K. issues, known as gilts, just as the Bank of England's quantitative easing program under which it is buying up 175 billion pounds of gilts.
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