The FSA has published its Business Plan for 2010/2011.

The Business Plan is organised into five sections:

  • Delivering financial stability - contributing to the protection and enhancement of the stability of the financial system.
  • Delivering market confidence - maintaining confidence in the financial markets.
  • Delivering consumer protection - securing the appropriate degree of protection for consumers.
  • Delivering a reduction of financial crime - reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.
  • Delivering the FSA's operational platform.

In section 2 of the Business Plan the FSA discussed maintaining confidence in financial markets. One key area highlighted by the financial crisis was deficiencies within the over-the-counter (OTC) derivatives markets - most notably shortcomings in managing counterparty credit risk and the absence of sufficient transparency. The FSA reported that this issue represents a major risk to market confidence and subsequently requires much more attention, particularly given the overlap with its wider prudential work on capital and collateral management.

The FSA's focus this year will be to ensure that proposals for a new EU regime strengthens OTC infrastructures in the right areas. It will also assist in the international coordination that will help to ensure that a globally consistent approach is implemented.

The FSA also referred to its December 2009 paper, Reforming OTC Derivative Markets, which stated that the following measures need to be implemented and/or developed to address systemic shortcomings in OTC derivatives markets:

  • Greater standardisation of OTC derivatives contracts.
  • More robust counterparty risk management.
  • Consistent and high global standards for central counterparties.
  • International agreement about which products are 'clearing eligible'.
  • Capital charges to reflect appropriately the risks posed to the financial system.
  • Registration of all relevant OTC derivatives trades in a trade depositary.

View FSA Business Plan 2010/2011, 17 March 2010