The regulator said that non-banks had the potential to destabilise market confidence and so should be required to hold at least 20% of eligible capital.
The FSA said: “These lenders are significant market participants and they can cause significant consumer detriment. Our view is that we should increase the quality and quantity of capital required for these lenders to increase their loss absorbency, which was a key failing across the market during the crisis.
“Holding a minimum amount of share capital and reserves should help a firm absorb losses while either continuing to trade or to help prepare for a more orderly wind-down and withdrawal from the market.”
The FSA said the 20% of eligible capital should be share capital and reserves less intangible assets.
The MMR rules will be implemented on 26 April 2014.
