'Dig deeper' on Credit Derivatives, TCA Consulting Tells FSA

The FSA’s new discussion paper, Cross Sector Risk Transfers, on the use of Credit Derivatives to transfer risks between institutions, fails to consider the operational and systems risks that organisations trading in Credit Derivatives are running, according to TCA Consulting, an IT consultancy to the financial services sector. Whilst TCA Consulting broadly supports the conclusions reached by the FSA, it argues that they have so far glossed over the extreme levels of operational risk that many institutions may be running. TCA Consulting argues that whilst the FSA’s report takes great pains to emphasis that ‘inadequate systems, controls and a failure of senior management to appreciate the risks’ is of concern, it fails to elaborate further, even though these represent a potentially larger cause of loss than legal and regulatory issues.

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