View more on these topics

Stress test to assess performance

The FSA says structured product providers should stresstest their products to establish how they would perform under a variety of conditions.

Last week, the FSA published guidance following its review of structured product development and governance.

It says stress tests should be built into the product approval process, with defined triggers for when they will be applied. The regulator says stress tests may not need to be applied in very simple repetitions of a recent product.

The FSA says stress-testing should be forward-looking as well as backward-facing and should analyse the resilience of a product over its proposed term.

It should include scenario testing of products that takes account of internal risks like failure of the firm’s systems or bigger than expected volumes, and external risks like market stresses such as interest rates changes and currency risks.

The regulator says where there is a value-for-money test, such as a comparison with cash, there should be a “sufficiently demanding hurdle rate”, or minimum rate of return.

The guidance follows an FSA review into the sector, carried out between November 2010 and May 2011, which found weaknesses in the way firms are designing and approving structured products.

Lowes Financial Management managing director Ian Lowes says: “I am not sure there is consensus on exactly what stress-testing is. I think what is key is whether products are being sold to the right sort of investors.”



CML fights for non-advised sales in MMR response

The Council of Mortgage Lenders has submitted its response to the mortgage market review, in which it calls for lenders’ call centre staff to be exempt from offering advice. The trade body says the requirement for lenders to offer advice where there is spoken or interactive dialogue is likely to have a disproportionate impact on […]


Ministry of Justice launches investigation into PPI claims

The Ministry of Justice has launched an investigation into claims management companies after a wave of invalid compensation claims on behalf of customers allegedly mis-sold payment protection insurance. According to the Financial Times, the move comes after the ministry received a number of complaints from banks over the issue. Around 80 per cent of PPI […]

Analysis: Insurers secure rethink on matching premium

Insurers have secured a last-ditch amendment to Solvency II rules which could prevent a 20 per cent drop in annuity rates, although concerns remain about its implementation. There has been concern that measures put forward by the European Parliament’s Econ committee would not contain reference to a so-called “matching premium”. The Association of British Insurers […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm