UK regulator asks prop traders to assess capital levels

The UK’s Financial Conduct Authority (FCA) has written to proprietary trading firms to assess their capital adequacy.

The UK’s Financial Conduct Authority (FCA) has written to proprietary trading firms to assess their capital adequacy.

A report published today by Risk Magazine says the UK regulator approached prop trading firms to assess their capital levels on the day after the UK’s referendum to leave the European Union.

The magazine states that it has had sight of a memo from the FCA in which it asks firms to breakdown the composition of their capital by currency and seeks an impact assessment on how currency movements affected capital levels.  

The regulator declined to comment when contacted by The Trade.

The timing of the news comes as Sterling slid to its lowest level ($1.2940) against the US dollar in 31 years as traders opted for the Japanese yen over the British pound.

Sterling is now down 14.8% from the high point immediately before the referendum vote last month.

Jake Trask, currency analyst at UKForex, said the new low came despite reassurances from Mark Carney, governor of the Bank of England.

He said: “Sterling fell to a new multi-year low, as Mark Carney looked to reassure the markets that the Bank of England was willing to prop up banks with extra liquidity.

“The first solid evidence of the damage done by the UK’s decision to leave the EU is likely to be August’s PMI data, which is expected to drop below 50 for all surveyed sectors. 

“Should the drop be further than expected, we could see Carney open[ing] the taps on another course of quantitative easing, to try and stave off a deep recession.”

 

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