How's this for squeezing private sector borrowing?
Under the guise of making banks safer,the UK's Financial Services Authority has announced a new plan that will require UK banks and investment firms to increase their holdings of cash and government bonds by £110bn. That's in year one of the plan.
If the FSA ramps up the requirements in subsequent years, as expected, banks and investment firms could have to increase their holdings of easily saleable assets by a total of £370bn or cut their reliance on short-term funding by 80 per cent from today’s levels and boost their cash and bonds by a total of £170bn, FT reports.
The FSA has promised the regulations will not take effect until regulators are confident the recession is over.
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