FSA focuses on priority risks for 2008

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LONDON – “2007 proved a difficult year for the financial services industry and for the FSA,” begins Callum McCarthy, chairman of the UK Financial Services Authority (FSA), in the foreword to his organisation’s budget for 2008.

The document says the FSA will concentrate on the “priority risks” identified in its Financial Risk Outlook (FRO) published last month, learning lessons from the credit crisis and the run on Northern Rock.

Priorities include increasing transparency; easing the complexity of credit ratings; developing understanding of off-balance sheet structures; improving general operational preparedness for unexpected events and redressing inadequacies in stress testing.

The FSA says it is engaged in a supervisory review with the Bank of England on the liquidity framework and tripartite co-operation between the FSA, Bank of England and the Treasury for depositor protection – welcome collaborative developments for Britain’s beleaguered supervisors.

The budget also notes that the FSA intends to continue its principles-based approach and Treating Customers Fairly initiative, in addition to reviewing whether deposit-taking is appropriately regulated by the Banking Code.