Financial Fair Play Rules – All You Need to Know

Financial Fair Play Rules: We are hearing more and more about financial fair play (FFP) in football, with clubs across Europe already facing punishments for breaching its rules. But how does it work? Are there any rules that set the limits? And what would be the consequences of breaking such rules? Takes a look at what FFP is and what its rules are via today’s blog.

What is Financial Fair Play?

Financial Fair Play (FFP) was established by UEFA. It makes sure that football clubs were not spending more than they earned. FFP regulations were also made in order to prevent clubs from overspending across several seasons within a set budgetary framework.

Implementation of FFP took place at the beginning of the 2011-12 season. And rules were agreed to in September 2009 by the Financial Control Panel of UEFA.

The Club Financial Control Body (CFCB) is an independent panel within UEFA that has investigatory and adjudicatory arms). They are tasked with policing FFP and ensuring the regulations are followed.

In unofficial terms, it was implemented as a means of combating excessive spending by wealthy club owners. They were deemed to be creating an unfair playing field.

Clubs that have qualified for UEFA competitions are assessed against breakeven requirements over three-year periods. Their spending has to be balanced with the revenue they generate to, in theory, encourage good financial practice and prevent clubs from accumulating debt.

With the ever-climbing transfer fees and players’ wages, clubs have started to find difficulty to remain in keeping with FFP rules and breaching the regulations.

The majority of football debt in Europe is owed by its three most dominant leagues in the Premier League, the Serie A, and La Liga. Even among elite European clubs, continued excessive spending within the transfer market has been justified by owners and executives as being necessary to keep the club competition competitive.

What must clubs do to comply with FFP?

UEFA made its first FFP ruling in April based on club accounts from the 2011-12 and 2012-13 seasons.
Clubs can spend up to 5m euros (£3.9m) more than they earn per assessment period. However, under this monitoring period, total losses of 45m euros (£35m) were permitted as long as clubs had owners who could cover such amounts.

From now on, the assessment will be made over a rolling three-year period. UEFA president Michel Platini says “the framework for FFP must be dynamic and it must evolve constantly”

For 2014-15, losses will still be limited to 45m euros (£35m). For 2015-16, the monitoring period will again cover the previous three seasons, but the limit will drop to 30m euros (£25.5m). The pattern is repeated in 2016-17 and 2017-18.

In the following years, the limit will be lower, with the exact amount still to be decided. Clubs are also obliged to meet all their transfer and employee payment commitments at all times.

Are club owners allowed to supply their own money to be in keeping with Financial Fair Play rules?

A slew of European clubs has been in a situation where they were allowed to spend more than they earned due to their wealthy owners. They helped the club financially through their own financial endowments, paying off debts, injecting cash flow, and providing added monetary support.

The presence of wealthy owners has adversely affected the football market by creating steep wage and transfer inflation. Besides, they have encouraged others to also spend more in order to keep up with demands and to maintain their reputation as a competitive club.

According to UEFA, if a club owner has injected money into the club through a sponsorship deal with a company they are related to, UEFA will investigate. And, should the situation permit, they adapt the calculations of the break-even result for the revenues to the level that is appropriate (‘fair value’) and in keeping with market prices.

Manchester City is owned by Sheikh Mansour, one of the wealthiest men in the world. And since 2008, they have spent over £1 billion on player purchases and infrastructure at the club. It has drawn criticism from other clubs and figures. Therefore, they have recently been subject to more scrutiny of FFP breaches by UEFA.

How has UEFA punished teams in the past?

If a team breaks FFP rules, it is down to the CFCB to decide on the sanction. The measures it can inflict range from a simple warning to being kicked out of UEFA competitions (or being excluded from one in the future).

Fines can also be dished out. Titles can be withdrawn and UEFA can withhold revenues earned from its competitions, such as the Champions League.

Manchester City was fined €60m by UEFA in 2014. Their squad was reduced to 21 players for the 2014-15 Champions League. And €40m (£33.7m) of their €60m fine was suspended. AC Milan voluntarily accepted a one-year ban from all European competitions during the 2019-20 season, when they had qualified for the Europa League, after breaching FFP rules.

Other clubs who have faced fines include Astana, Fenerbahce, Dinamo Zagreb, Trabzonspor (twice), Osijek, and Hajduk Split.

Which clubs have been penalized by Financial Fair Play?

In April 2014, it was revealed that less than 20 clubs had been thought to have violated the break-even rule of FFP. And Manchester City and Paris Saint-Germain were among the clubs listed.

In May 2014, UEFA announced that they reached settlements with nine clubs after FFP investigations. They had sanctions cover break-even targets (limit of wage bill), sporting measures (decrease of UEFA club competition size), and financial contributions (fines).

PSG was handed a €60m fine with €40m suspended. And their UEFA squad was reduced to 21 players as well as transfer spending restrictions and two-year squad salary restrictions.

Manchester City was given a €60m fine, suspended €40m, and also had the same squad reduction and transfer limitations.

Due to improved financial conditions, the sanctions on Manchester City and Paris Saint-Germain were partially lifted in 2015. However, they have been the subject of another potential investigation by UEFA following their breaching of FFP rules in 2014.

Does the Premier League Have Financial Fair Play Rules?

The short answer would be yes, the Premier League does have its own Financial Fair Play rules. However, it must be noted that these rules are far less strict than those implemented by UEFA’s Financial Fair Play.

Whether the lenient nature of the EPL’s financial rules is intentional or not could be a matter of debate. Perhaps the English FA isn’t too adamant about limiting the economical margins of EPL clubs. The governing authority would be far more content watching the clubs attract the biggest stars to English shores.

Therefore, we’re yet to see a Premier League side truly struggling to meet the financial requirements set by the league. In contrast, other European federations are adopting much stricter regulations. La Liga’s Salary Cap rules are a prime example, as it famously resulted in Lionel Messi’s shocking exit from Barcelona in 2021.

It should be noted that lower divisions in England adopted a Salary Cap rule. However, in February 2021, both League One and League Two abandoned this rule following the Covid-19 pandemic.

Premier League Financial Rules

According to the Premier League’s official website, the league’s financial rules state that clubs must pay transfer fees, salaries, and tax bills on time. They must also submit accounts annually, and disclose payments made to agents.

Moreover, clubs cannot make a loss that exceeds 105 million Pounds across three seasons. Otherwise, they would face severe punishments and even point deductions. However, if the loss is in-between £15 and £105 million, then the deficit must be covered by the club’s owners.

These rules appear to be a slight tap on the wrist compared to the ones implemented by UEFA’s Financial Fair Play. The clubs would face far stricter punishments for even smaller economical losses.

According to UEFA’s official website, the clubs can only spend 5 million Euros more than what they earned during an assessment period of three years. However, the limit can reach €30 million if it’s completely covered by club owners or third parties during the assessment period of 2015/16, 2016/17, and 2017/18.

UEFA’s view was to further lower the numbers and prevent the clubs from overspending. However, the Covid-19 pandemic delayed these proceedings, with the European governing body taking a lighter stance. They allow the clubs to recover from the severe financial consequences of the worldwide virus.

Conclusion

In short, clubs will be limited to spending a set percentage of their revenue in a calendar year on transfers, agents’ fees, and player wages. This season will be the last under UEFA’s current FFP rules as they are due to change next year. The limit in 2023 will be 90 percent before dropping to 80% in 2024 and 70% from 2025 onwards.

As the new system is bedded in, UEFA intends to continually monitor clubs and enter a dialogue with them if a flag is raised. The new rules will be called the “financial sustainability and club licensing regulations” (FSCLR).

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