FSA: Lenders should assess credit situation

News Category: Management

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The Financial Services Authority (FSA) has issued a warning to lenders to protect themselves against possible future credit risks.

The group believes that there is "a very real prospect" of credit risk and liquidity conditions worsening further in 2008, and has urged firms to assess their funding and liquidity positions.

They ought to undertake "robust" stress testing, review their medium and longer-term strategies and consider contingency plans, the organisation believes.

FSA retail managing director Clive Briault said: "We want there to be a competitive and thriving mortgage market in the UK which clearly meets the needs of consumers.

"This requires lenders who have clear strategies - appropriately stress tested - that take account of the changing world, with viable funding models, and with boards and senior management that understand and know how to operate in the best interests of their customers in a variety of market conditions."

Worsening credit conditions already seem to have led to an increase in arrears and repossessions, in the wake of the global credit crunch.

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