The UK Financial Services Authority (FSA) on Wednesday recommended that banks' capital framework be tightened to eliminate the arbitrage between banking and trading capital requirements, in a paper reviewing trading activity regulation.
Increasing the coherence of the capital framework was one of the three key areas the FSA looked at, with the others being valuation, and risk management and modelling. Paul Sharma, the regulator's director of prudential policy, pointed out that an "over-reliance
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