The Financial Services Authority (FSA) has announced details of a new regulation regime for personal investment firms to make sure that they are better prepared from any financial shocks in the future.

Under the new rules, companies will have to hold capital reserves of at least three months’ worth of their total annual expenditure in liquid assets, including cash. The minimum amount of ready capital they must have is £20,000.

Regulators believe this will help make firms in the sector more stable, protecting them from external shocks. Additionally, it will mean that they can compensate consumers in the event of being wound up.

The move could help protect banking graduate schemes in the sector, as companies may be better able to withstand pressure when things get tough.

Director of prudential policy at the FSA, Paul Sharma, said: "One of the lessons learned from the current crisis is that firms need to hold enough capital resources in order to weather future financial storms.

Last week, it was announced that some of Britain’s major retail banks would be broken up to boost competition in the sector.

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