At its meeting on 16 June 2011, the Financial Policy Committee agreed the following policy recommendations:
1. The Committee advises the Financial Services Authority (FSA) to ensure that improved disclosure of sovereign and banking sector exposures by major UK banks becomes a permanent part of their reporting framework, and to work with the FPC to consider further extensions of disclosure in the future.
2. The Committee advises the FSA to compile data on the current sovereign and banking sector exposures of other UK banks not subject to the EBA stress tests. If these exposures are significant, then the FSA should publish an aggregate estimate.
3. The Committee advises the FSA to extend its review of forbearance and associated provisioning practices across UK banks’ household and corporate sector exposures on a global basis.
4. The Committee advises UK banks that, during the transition to the new Basel III capital requirements, they should take the opportunity of periods of strong earnings to build capital so that credit availability is not constrained in periods of stress.
5. The Committee advises the FSA, as part of its regular supervisory dialogue with banks, to ensure that the proportion of earnings retained is consistent with the advice in the preceding recommendation.
6. The Committee advises the FSA that its bank supervisors should monitor closely the risks associated with opaque funding structures, such as collateral swaps or similar transactions employed by exchange-traded funds.
Published on
24 June 2011
Financial Policy Committee record