Groundbreaking new liquidity standards from the Financial Services Authority could force UK banks and investment companies to increase their holdings of cash and government bonds by £110bn and cut their reliance on short-term funding by 20 per cent in the first year alone.

If the FSA ramps up the requirements in subsequent years, as is likely, banks might have to increase their holdings of easily saleable assets by a total of £370bn or significantly cut their reliance on short-term funding.