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The FSA has warned that the global credit crunch has ramped up the risks of a rogue trader scandal, such as the Société Générale affair, washing up on British shores.
FSA chairman Sir Callum has faced heavy criticism over Northern Rock. The regulator also made a pointed criticism of the equity derivatives market, the specialist area where SocGen's rogue trader Jérôme Kerviel operated.
The FSA criticised weak back-office systems in the equity derivatives market, making particular reference to a lack of standardised trade confirmations - documents falsified by Kerviel as part of his attempts to hide his unauthorised trades. The regulator called for trades to be fully automated.
"Increasing financial pressure on firms, employees and consumers could increase the motivation of some to commit financial crime, including market abuse and fraud," the report says. "At the same time, the consequences of crimes committed under the more benign conditions in previous years may be more likely to come to light when firms are faced with more difficult economic conditions."
On the failings of the equity derivatives market, the watchdog said: "The industry has made some progress on these issues, but there is still much progress to be made before equity derivative confirmation processes may be considered fully scalable."
The regulator also echoed warnings from the Bank of England about over-indebted
The report also calls for "rigorous stress tests" across the financial services industry, following the collapse of the securitisation markets and complex structured credit markets.
In a clear reference to the Northern Rock saga, the regulator also warned banks and building societies to draw up clear plans on how savers could withdraw their money quickly in the event of a "bank run".
The report argues that consumers are more likely to be fearful of the financial system as a whole if they encounter difficulties withdrawing their cash - such as those experienced by Northern Rock savers.
Sir Callum McCarthy, the chairman of the FSA, said: "To be clear, these are not firm predictions about what we think will actually happen but are a prudent attempt to highlight the risks that could impact consumers and firms in a less benign economy.
"Firms and consumers need to recognise there are both short and long term risks and should think about the implications.
"Firms are clearly more aware of these risks now and should continue to consider how they would respond to a crystallisation of these risks particularly those relating to capital and liquidity."
By Iain Dey, Financial services correspondent