The Financial Risk Outlook 2003, published yesterday by the Financial Services Authority, highlights a number of risks associated with the economic outlook and depressed conditions in financial markets.
FSA managing director Carol Sergeant says: “The year ahead should be one of modest recovery. But there are considerable uncertainties and plenty of reasons for caution at a time when more consumers look financially stretched and some sectors have seen their profitability and capital reserves reduce markedly.
“Some consumers don't seem to be thinking ahead prudently when deciding how much to borrow and how much to save. This could cost them dearly in the long run.
“Borrowing by consumers in the UK has been growing at an unsustainable rate and some segments of the population are already having difficulty meeting their debt commitments. There is a risk that when a correction comes, it could be rapid and disorderly. The results could be lower overall economic growth, hardship for consumers and increased credit risks for lenders.
“Over the longer term, people need to put a lot more aside if they are going to enjoy the standard of living in retirement they expect. But quick fix solutions using complex products promising high returns are likely to be more trouble than they are worth.”
Sergeant adds: “The FSA's programme of work to be published next week will explain how the FSA will continue to address the major issues that fall within its remit. Many issues are long-term in nature and require co-operation with others. But each consumer and each regulated firm has the opportunity and responsibility to review their own particular circumtances on a continuous basis.”