In recent months, a topic of major discussion in the European football community has been the UEFA Financial Fair Play (FFP) Regulations, the application of which has seen fines of up to 50 million euro being imposed on clubs like Manchester City and Paris Saint-Germain. In other quarters, newly promoted Premier League club Queens Park Rangers have been fined an enormous 40 million pounds because of their breach of the Football League FFP regulations during their time in the Championship. Complications have shown up in the case of QPR that could see them lose their professional league status if they are relegated this season. Amidst all this, a lot of people remain clueless about what FFP is and how it works.

The objective of the FFP regulations is to ensure sustainability in the finances of football clubs across Europe. The UEFA FFP regulation was the first piece of legislation to be passed in this regard, making the participation of clubs in European competitions liable to sanctions if they fail to comply with UEFA's financial standards. Football Associations across Europe have taken to preparing legislation of their own to ensure that similar standards are applied to their domestic leagues.

The FFP basically requires clubs to get close to “breaking even” in money earned and spent through deficit minimisation. Money has had a big say in club football in modern times and we have seen clubs spending more than what they earn, taking themselves knee deep in debt. The influx of money from Arab Sheikhs, Russian oil tycoons and American businessmen in European football has only radicalised this process of unplanned spending. The FFP regulations require the clubs to stay under a maximum amount of deficit, surpassing which results in sanctions. According to the UEFA FFP rulings, to pass the break even test, clubs are required to have a deficit less than 45 million euro in the period starting from the 2011 season to 2013/14. The deficit cap for the Premier League FFP is extremely lenient though, allowing clubs to go 105 million pounds under in the same period. For clubs without a rich owner willing to inject capital to save his club, the numbers become much stricter; 15 million pounds for the Premier League and only 5 million euro for the UEFA FFP, and these figures will gradually decrease in the coming years. Some leniency is offered in regards to calculations of expenditure as stadium development and youth team costs are excluded. The expenditure will, however, include transfer fees, wages, finance costs and dividends. The income will include gate charges, player sales, sponsorships, TV revenue, merchandising etc. This explains why Manchester United, despite spending rather lavishly, have little chance of being under any real danger of FFP sanctions, while clubs like Liverpool have been investigated by UEFA in the past.

UEFA has authorised sanctions ranging from a reprimand to expulsion from future UEFA competitions for clubs unable to comply. These sanctions include a diluted squad for teams participating in the UEFA Champions or Europa League, deduction of points in the group stages of these tournaments, transfer bans and of course, fines. The domestic leagues have more or less the same sanctions, although the Premier League regulations state that the only punishment for unruly financial behaviour is point deduction. The threat of such sanctions should be enough to make sure clubs don't overspend and self destruct, but from what we have seen, it's not. This is why FFP is necessary, because looking at how the clubs operate, they don't often know what's good for them.