Banks and other lenders face an immediate impact of up to a £5bn drop in revenue as a result of having to hold more sterling gilts or OECD government bonds than previously under 'far-reaching and robust changes' to Britain's liquidity regime proposed by the Financial Services Authority (FSA).

However, in a consultation paper released yesterday, the FSA said it expected the loss in revenue to be offset by possibly bigger benefits to the lenders from healthier balance sheets, lower losses and a reduction in funding costs.

Companies who have to adhere to the new liquidity rules also face between £150m and £200m in other costs for training, reporting and information technology, while the FSA itself will carry costs between £11m and £14m linked to the new rules.

Andrew Strange, AIFA director of policy, told the Financial Times that, although he fully understood the need to review the requirements in the current economic climate, the proposed increase could pose serious risks to IFA businesses already having difficulties.

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