The responses confirmed the view that liquidity issues have a wide scope and that any policies need to be discussed at international cooperation levels. There was also agreement on the importance of a close relationship between the central bank and the firms’ internal liquidity risk management processes; this in addition to any new regulatory requirements. Respondents also confirmed the importance of stress testing scenarios and contingency funding plans, and that they were reviewing and upgrading their activities in these areas.

The question of quantitative measurement of risk was much debated. Most respondents agreed that quantitative requirements were a necessary component of any liquidity regime but there was scepticism about the usefulness of quantitative requirements in long-term chronic liquidity situations and about the possibility of standardisation across institutions.

Paul Sharma, Director of Wholesale and Prudential Policy at the FSA, said: "We welcome the wide range of feedback we have received to DP07/7 (the discussion paper). The responses contain useful comments and suggestions, which we will consider in detail as we develop our work on a new liquidity regime.  We look forward to continuing our constructive engagement with the industry and other interested stakeholders and remain committed to full transparency throughout the ensuing consultation process."

The FSA intends to consult further later this year including putting forward proposals on sound practices for managing liquidity risk with a strong focus on stress-testing.  These will reflect the work currently underway in the Basel Committee and to work with global developments such as that going on at the CEBS and the EC’s cross-Atlantic discussions with the SEC.