The FSA has published its 2008 Financial Risk Outlook (FRO 2008). In the FRO 2008 the FSA focuses on the risks arising from the events of the second half of 2007 and the less benign economic outlook that the FSA expects over the next 18 months.

In the FRO 2008 the FSA identifies 5 priority risks which are:

  • Existing business models of some financial institutions are under strain as a result of adverse market conditions.
  • Increased financial pressures may lead to financial firms shifting their efforts away from focusing on conduct of business requirements and from maintaining and strengthening business-as-usual processes. 
  • Market participants and consumers may lose confidence in financial institutions and in the authorities’ ability to safeguard the financial system.
  • A significant minority of consumers could experience financial problems because of their high levels of borrowing.
  • Tighter economic conditions could increase the incidence or discovery of some types of financial crime or lead to firms’ resources being diverted away from tackling financial crime.

The FSA states in the FRO 2008 that despite the more difficult economic and financial conditions, firms must not divert attention away from focusing on conduct-of-business requirements and the FSA’s high-level principles. Firms will need to ensure that they treat customers fairly, continue to tackle market abuse and other areas of financial crime, and address other conduct-of business requirements. The FSA also confirms that it will continue to focus on other longer term risks which are not discussed at length in FRO 2008. These include longevity, the future for the retail distribution of financial products, conduct-of-business issues and climate change.

View FSA Financial Risk Outlook 2008, 29 January 2008