Bank of England in stand-off with FCA over trading firms’ capital

The FT reports a public standoff between the Bank of England and the Financial Conduct Authority over capital requirements for trading firms. The regulatory dispute raises uncertainty about future rules for market-making and proprietary trading, which could increase trading costs, reduce liquidity and boost volatility in UK markets. That uncertainty is likely to weigh on the UK 100 index as investors reassess regulatory and operational risk for trading firms and related financial sector stocks. Near-term market reaction may be driven by headlines and any signs of tougher capital demands or a compromise between regulators.