FSA states consumers to be hit hard by credit crunch

Officials from the UK’s financial regulator, the Financial Services Authority, have stated that consumers are likely to be hit hard by the ongoing global credit crunch. The FSA said that the deepening financial crisis had “potentially severe implications”. One senior official said that markets had not even yet hit rock bottom, although he added that they were almost there.

He stated: “Market confidence will only return when investors believe they know where the bottom is. The events of the last few days show that we are not there yet — but we are getting closer to that point.” He also said that experts had not anticipated the huge “collapse of investor confidence and the subsequent liquidity squeeze.”

He went on to state: “This loss of confidence was in many ways due to the lack of transparency and understanding with both buyers and sellers of products, forgetting the golden rule of don’t sell or buy a product that you don’t understand.” He added: “While there have been a small number of high-profile hedge fund liquidations and periods of high volume outflows from pooled firms, most firms appear to be coping in this challenging period.”

He asked that senior asset managers ensure that appropriate controls and procedures are put into place, adding: “Management should consider whether any headcount reduction exercise would compromise the central operational functions.”