The Bank of England has raised concerns over plans by the Financial Conduct Authority (FCA) to reduce capital requirements for specialist trading firms, according to reports.
The proposals would affect major market players such as Citadel Securities, Jane Street and Hudson River Trading. BoE officials are said to be worried that loosening rules could weaken the sector’s resilience during periods of financial stress.
The FCA has been reviewing the framework since December, arguing that current capital rules — inherited from the European Union and designed for large banks — may be overly restrictive for specialist trading firms. Reforming them could free up capital and improve the UK’s competitiveness as a financial hub.
Options under consideration include adjustments to existing EU-aligned rules, a shift towards the U.S. “net capital” approach, or allowing firms to use internal models to calculate requirements.
However, the Bank of England is concerned about the potential incentives such changes could create, warning they may leave firms less prepared to absorb shocks in a crisis.
The debate highlights a broader tension between boosting market competitiveness and maintaining financial stability, with regulators weighing how far rules can be relaxed without increasing systemic risk.
