The FSA has today published its Financial Risks Outlook 2008 report (PDF Download), which sets out the FSA view on the UK financial markets, and where it sees potential risks.

Not only does this report provide an excellent summary of where the world economy and the UK within it appears to be at present, it also discusses the FSA’s priority risks for this year.

It’s not a light read - 70 pages of quite detailed content - but there is an extensive section titled “Industry Focus” which sets out the FSA’s thoughts on what it sees as risks in each financial area.  And some of it makes for quite worrying reading for those involved in financial services.

Leaving aside the massive problems with consumer lending the report also includes some pearls which should guide industry leaders in their future dealings with the FSA, and clearly states where the potholes are.  Non-subtle pointers include:

• Of the Retail Distribution Review: “We hope that our Review will act as a catalyst for the generation of market solutions to these issues by the banks and building societies as well as by other retail intermediaries, although we recognise that regulation may have to change to facilitate this.
• Of the end of ‘Free’ banking: “The introduction of charges for personal current accounts could also have implications for financial inclusion as some customers may not be able to afford to pay for banking services. Whatever strategy is adopted, banks will need to be mindful of their obligations to treat customers fairly and the OFT’s requirements for a competitive market.”
• Of Retail Intermediaries: “The existing pressure on financial resources combined with a less benign economic outlook means that there is a heightened risk of firm failure and increased pressure to sell products inappropriately, increasing the potential for consumer detriment.”
• Of Payment Protection Insurance: “In the general insurance sector we are particularly concerned about poor advice given to customers where sales of insurance products such as payment protection insurance (PPI) are supplementary to the primary business of the firm.”
• Of Retail Intermediaries: “Finally, there are questions over the standards of professionalism and competence in firms, with some advisers having inadequate levels of training, qualifications and experience, partly due to the low barriers to entry.”

Of course not all of these will be news to those paying close attention to what the FSA says, but these are just a few of the pearls I picked out in a 10 minute skim read of this report.  Any senior managers in any firm that has dealings with the FSA would be well advised to download a copy of this and read it thoroughly.  At least you won’t be able to claim next year “well no one warned me about that”.  As the saying goes - forewarned is forearmed.