FSA undecided over toxic loan pension schemes

The Financial Services Authority (FSA) has failed to reach a consensus on pension schemes accepting toxic loans from banks through loopholes in existing regulations, it has been reported.

According to City Wire, the financial regulator has investigated the activities, which involve complex liquidity swaps in which banks trade bonds linked to sub-prime mortgage loans and other 'toxic assets' for government bonds.

However it remains undecided on whether it should allow these deals, which are becoming increasingly popular among insurers and pension schemes, to continue.

The FSA is set to be scrapped next year in favour of three separate bodies which it is hoped will have greater levels of expertise to deal with future financial issues as they arise.

Under the terms of the government's Financial Services Bill, which was launched last week, the FSA would be phased out in favour of a Financial Policy Committee, a Prudential Regulation Authority and a Financial Conduct Authority.

The first two would be the responsibility of the Bank of England to operate, while the latter would stand as an independent body.

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