How have firms’ views on financial stability risks changed since the Covid pandemic?

Every six months, we conduct a Systemic Risk Survey to ask market participants how confident they are in the UK financial system and what risks they think the system is facing. Survey participants include UK banks and building societies, large foreign banks, asset managers, hedge funds, insurers, pension funds, large non-financial companies and central counterparties.

The perceived risks to financial stability in the UK, as highlighted by market participants, have changed significantly over the past decade, and since the Covid pandemic started (Chart A). In 2021 H2, the risk of a cyber attack became the most cited risk for the first time since the survey started and the risks surrounding the pandemic entered the top three categories.

Chart A: Main sources of risk mentioned by respondents shifted as the risk environment developed ^(a)

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Footnotes

• Source: Systemic Risk Survey, Bank of England.
• (a) Respondents were asked to list the five risks they thought would have the greatest impact on the UK financial system if they were to materialise. Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was assigned to each answer. Chart figures are the percentages of respondents citing a given risk at least once, among respondents citing at least one key risk.

In the 2019 H2 survey, UK political risk was cited as a main source of risk by 96% of respondents. In the most recent survey, however firms focused more on other sources of risk, with a significant rise in the number of firms citing pandemic, inflation or operational-related risks. The majority of respondents citing operational risk specifically mentioned the risks from climate change.

Based on our survey data, we can see that cyber risks and geopolitical risks have been consistently highly cited for the past six surveys and cyber risk in particular has seen increases in the number of respondents citing it as the most challenging risk to manage.

Furthermore, the risk of a cyber attack, risk related to the pandemic and geopolitical risk were most frequently cited as the risks most probable to materialise.

This post was prepared with the help of Ryan Lovelock.

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