FSA/PN/040/2005

19 April 2005

The FSA today revealed how it assesses and prioritises emerging retail market and product risks and highlighted some of the issues it had recently considered.

Material on the website, entitled "Identifying and responding to emerging retail risks", is the first time the FSA has been transparent about how it identifies potential issues and what it is currently working on. The information will be regularly updated to include results of work undertaken and new emerging risk. The work contributes to achieving the FSA's aim to help retail consumers achieve a fair deal.

Anna Bradley, Consumer Sector Leader at the FSA said:

"This risk identification work is all about being on the front foot; protecting consumers by identifying the issues today that could become problems tomorrow.

"We hope that by being open about the work we are doing on emerging risk we will encourage all our stakeholders; firms, trade associations, consumers groups and consumers themselves to contribute intelligence to us, identifying risks they think we should be addressing."

Some of the current and recent issues the FSA has considered are:

  • Payment Protection Insurance
  • Mortgage Disclosure Documents
  • Contracting out of the state second pension (SERPS/S2P)
  • The Child Trust Fund
  • Venture Capital Trusts
  • Premium and variable interest rate reviews
  • Income Withdrawal
  • Distribution Bonds
  • Financial Promotions

Further detail on each can be found on the Identifying and responding to emerging retail risks page.

The work on emerging risk is part of thematic activity at the FSA; identifying risks arising across different types of firms and market sectors and mitigating them where the risk-based approach justifies doing so. Thematic activity is, of course, only part of the FSA's risk-based work; a core part is with individual firms taking steps to mitigate risks with the firm concerned.

Notes to editors:

How the FSA identifies thematic risks:

Risks in the retail market take many forms: risks to consumers, firms, sectors, or the market as a whole. The FSA identifies emerging retail risks in a number of ways, including:

  • market data;
  • current trends and developments in the markets;
  • financial promotions;
  • issues identified through our discussions with firms; and
  • risks identified by our sector teams, supervisors, and contact centres, and by other stakeholders.

The FSA also look for flags like new or unexpected developments. For example, a surge in retail sales of a product, which seems unusual given market conditions, might prompt further enquiries. Monitoring of financial promotions is an important source of intelligence, as well as a significant monitoring and supervisory tool.

The FSA uses a risk-based approach to prioritise its workload to focus on the most significant risks. It will often do a small amount of work on an issue to identify whether more action is warranted.

  1. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  2. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

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