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The paper outlines the main risks facing firms, consumers and the regulatory system in the economic downturn, in particular the challenges created by banking sector and real economy deleveraging.
The scale of the financial crisis has created uncertainty over the future shape of the financial system, the Outlook states and underlines the need to review possible major changes in regulatory policies on banks and bank-like institutions.
The FRO is divided into three sections:
• Section A outlines issues relating to the regulation of banks and bank-like institutions which will be covered by the Turner Review and an FSA discussion paper due to be published in March.
• Section B describes the Central economic scenario, focusing in particular on how deleveraging is likely to affect firms, markets, consumers and the FSA. Three Alternative scenarios explore the ways in which the economy and financial sector could plausibly evolve over the medium and long term to highlight the substantial uncertainties that face both firms and consumers.
• Section C identifies the risks and implications of the financial and economic environment for firms, market participants and consumers.
The FSA intends to publish a Business Plan later this week.
Key messages for firms have been added at the end of each section.