The FSA identified five priority areas of risk that warranted attention, and highlighted that some firms’ existing business models were under strain because of the difficult market conditions.
It noted that these increased pressures could lead firms to shift their focus away from MCOB and ‘Treating Customers Fairly; requirements; something the FSA was adamant they must continue to concentrate on.
The outlook also revealed the high risk of consumers losing confidence in financial institutions and the authorities’ ability to safeguard the financial system. Added to this, the FSA predicted an increasing number of borrowers struggling to meet debt repayments.
The continuing tightening of economic conditions could also lead to an increase in financial crime, it was claimed.
Sir Callum McCarthy, chairman of the FSA, said: “These are not firm predictions about what we think will actually happen but are a prudent attempt to highlight the risks that could impact consumers and firms in a less benign economy.
“Firms and consumers need to recognise there are both short and long-term risks and should think about the implications.
Firms are clearly more aware of these risks now and should continue to consider how they would respond to a crystallisation of these risks particularly those relating to capital and liquidity.”
Richard Morea, technical manager at London & Country, said: “It’s probably the FSA’s position to be more cautious. I would be surprised if people do take their eye off the ball, as if the FSA highlights it, it would be foolish to do so. It’s the attention to detail that firms need to focus on for customer retention and growing customer share.”
