The Government told Treasury Select Committee members it had expressed concerns about the realistic possibility of creating a summary risk rating tool for financial products, according to its response to recent TSC proposals.
Details of the government response to the TSC report on confidence in the long-term savings report – published last week - suggests the government was concerned about the practicalities of any attempt to create a standardised risk ratings indicator, similar to a traffic light system proposed by Angela Eagle MP.
In a letter sent by the Treasury to the TSC committee, officials say:
“The Government has previously informed the Committee that we have concerns surrounding the practical difficulties that a summary risk rating could have, especially when one considers that the risk profile of a particular product may change in the future.
“However, the Government warmly welcomes the commitment of the FSA and the industry to examine this recommendation, and, along with the Committee, awaits the findings of their research.”
During evidence presented in May and June to the Treasury Select Committee, only the FSA suggested it was possible to create a summary risk ratings indicator, as most firms noted product risk ratings change over time and depending on investment content, along with the client’s attitude to risk.IFAonline
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