The FSA has published its 2009 Financial Risk Outlook (FRO 2009).
The FRO 2009 has a different structure from previous FROs. Previous FROs contained a section on the economic outlook and then a section on the implications for financial market developments. However, the FSA states that this does not fit into the current market reality, and that it is important to realise that the interrelated health of the financial system and the real economy will continue to be significantly influenced by the special interventions that the Tripartite Authorities have taken and will take again if necessary.
The FRO 2009 is structured as follows:
- Section A: Financial and economic crisis sets out an integrated view of the macroeconomic, financial and regulatory developments which lie behind the crisis; highlighting the interlinkages and self-reinforcing feedback loops between the financial markets and the real economy. The FSA also briefly considers the weaknesses in current regulation and the policy issues which will be discussed in the forthcoming Turner Review.
- Section B: Economic outlook describes the central economic scenario, focusing in particular on how deleveraging is likely to affect firms, markets, consumers and the FSA. This central scenario is not a forecast, but simply reflects the average ‘consensus’ of major published forecasts. As in previous years, the FRO 2009 also presents three alternative scenarios. These are presented in order to encourage firms to think about the range of possible economic outcomes in which they may have to operate. These are scenarios which the Tripartite Authorities are determined to influence, if necessary, by taking exceptional measures.
- Section C: Outlook for financial sectors and consumers identifies the risks and implications of the financial and economic environment for firms, market participants and consumers. The FSA also explores risks which it recognises to be of continuing importance even as the financial system faces major changes.
View Regulating the sale and rent back market: a consultation, 9 February 2009