The UK Financial Services Authority (FSA) has encountered financial “misengineering” in the past few months. Tony Huertas, director of the FSA’s wholesale firms division, says the regulator has encountered “rather severe” examples of financial engineering involving no risk during its probe into the use of finite reinsurance deals.

Speaking at a conference in London, Mr Huertas said the FSA does not object to legitimate financial engineering transactions, but will take action where there is no actual risk involved.