Overview
The Systemic Risk Survey is a biannual survey that asks market participants about perceived risks to, and their confidence in, the stability of the UK financial system. The survey is generally completed by executives responsible for firms’ risk management or treasury functions. The results presented are based on responses to the survey and do not necessarily reflect the Bank of England’s views on risks to the UK financial system. Participants include UK banks and building societies, large foreign banks, asset managers, hedge funds, insurers, pension funds, large non-financial companies and central counterparties. Summary statistics are calculated by giving equal weight to each survey response.
Additional background information on the survey is available in the 2009 Q3 Quarterly Bulletin article ‘Bank of England Systemic Risk Survey’.
Survey summary 2019 H2
In 2019 H2 the key observations are: confidence in the stability of the UK financial system over the next three years is broadly unchanged; the perceived probabilities of a high-impact event occurring over both the short and medium term has increased; and UK political risk remained the most cited risk to the UK financial system and the most challenging for firms to manage.
The Systemic Risk Survey
- The Systemic Risk Survey is conducted by the Bank of England on a biannual basis, to quantify and track market participants’ views of risks to, and their confidence in, the stability of the UK financial system.
- This report presents the results of the 2019 H2 survey, which was conducted between 23 September and 17 October.
Confidence in the stability of the UK financial system
- Confidence in the stability of the UK financial system over the next three years is broadly unchanged relative to recent surveys and around pre-EU referendum levels. Respondents were marginally both more likely to judge themselves as being completely confident or very confident (33%, +2 percentage points since the 2019 H1 survey), and less likely to judge themselves as fairly confident (60%, -3 percentage points).
Probability of a high-impact event in the UK financial system
- The perceived probabilities of a high-impact event in the UK financial system over both the short and medium term has increased. The percentage of respondents judging the probability of such an event over the short term to be high or very high increased significantly (from 52% to 73% since the 2019 H1 survey). The percentage judging the probability to be high or very high over the medium term also increased (from 51% to 63%).
Sources of risk to the UK financial system
- UK political risk remained the most cited risk to the UK financial system (mentioned by 96% of respondents, an increase of 3 percentage points when compared to 2019 H1) and also the most frequently cited number one source of risk (mentioned by 79% of respondents, +9 percentage points).
- Cyber-attack (61%) and geopolitical risk (58%) were the second and third most cited sources of risk to the financial system, respectively.
- The number of respondents that cited the risk of a global/overseas economic downturn remained stable at 38%, while the risk of financial market disruption/dislocation had a slight uptick from 27% to 31% of respondents, when compared to the previous survey.
Most challenging risks to manage as a firm
- UK political risk was cited the most often as the risk that would be most challenging to manage if it were to materialise, for the eighth consecutive survey (75% of respondents, -5 percentage points compared to a year earlier).
- The risk of a cyber-attack remained the second most challenging risk to manage, with 48% of respondents mentioning this category, which is a 7 percentage point decrease when compared to a year earlier
Introduction
The Bank of England’s financial stability objective is to protect and enhance the stability of the financial system of the United Kingdom. The Systemic Risk Survey contributes to this objective by quantifying and tracking, on a biannual basis, market participants’ views of risks to, and their confidence in, the stability of the UK financial system.[1]
The survey is typically completed by executives responsible for risk management and treasury functions at institutions including: UK banks and building societies; large foreign banks; asset managers; hedge funds; insurers; pension funds; large non-financial companies; and central counterparties. Eighty-four participants took part in the 2019 H2 survey between 23 September and 17 October, representing an 86% response rate among those surveyed.
Confidence in the UK financial system
Respondents were asked to assess the level of confidence they have in the stability of the UK financial system as a whole over the next three years.
Confidence in the stability of the UK financial system over the next three years is broadly unchanged relative to the 2019 H1 survey. Respondents were more likely to judge themselves as being completely confident or very confident (33%, +2 percentage points since the 2019 H1 survey), and less likely to judge themselves fairly confident (60%, -3 percentage points) (Table A1). When compared to 2016 H2, the proportion of respondents judging themselves as completely confident or very confident has increased by 12 percentage points and was around pre-EU referendum levels. Chart 1 weights these responses into one measure.
Chart 1 Confidence in the stability of the UK financial system as a whole over the next three years (a)
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) Respondents were asked how much confidence they had in the stability of the UK financial system as a whole over the next three years. The net percentage balance is calculated by weighting responses as follows: complete confidence (1), very confident (0.5), fairly confident (0), not very confident (-0.5) and no confidence (-1). Bars show the contribution of each component to the net percentage balance.
Probability of a high-impact event in the UK financial system
Respondents were asked for their view on the probability of a high-impact event in the UK financial system in the short and medium term.[2] In the 2019 H2 survey, the perceived probabilities of a high-impact event in the UK financial system over both the short and medium term increased.
The percentage of respondents judging the probability of a high impact event over the short term to be high or very high increased from 52% to 73% since the 2019 H1 survey, which is the highest this value has been since the survey started. And the percentage of respondents judging the probability to be low or very low decreased from 14% to 6%. The top panel of Chart 2 weights these probabilities into one measure.
Chart 2 Probability of a high-impact event in the UK financial system over the short term (a)(b)
How respondents think this probability has changed over the past six months (a)(b)
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) Respondents were asked the probability of a high-impact event in the UK financial system in the short term. And also how they thought this probability had changed over the past six months. From the 2009 H2 survey onwards, short term was defined as 0–12 months.
(b) The net percentage balance in the upper chart is calculated by weighting responses as follows: very high (1), high (0.5), medium (0), low (-0.5) and very low (-1). The net percentage balance in the lower chart is calculated as the percentage of respondents that perceived an increase, less the percentage that perceived a decrease. Bars show the contribution of each component to the net percentage balance.
The percentage of respondents judging the probability of a high-impact event to be high or very high over the medium term increased (from 51% to 63%), while the proportion of respondents judging the probability to be low or very low decreased significantly from 11% to 5%. The top panel of Chart 3 weights these probabilities into one measure.
Chart 3 Probability of a high-impact event in the UK financial system over the medium term (a)(b)
How respondents think this probability has changed over the past six months (a)(b)
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) Respondents were asked the probability of a high-impact event in the UK financial system in the medium term. And also how they thought this probability had changed over the past six months. From the 2009 H2 survey onwards, medium term was defined as 1–3 years.
(b) See footnote (b) of Chart 2.
Respondents were also asked how they perceived the risk of a high-impact event materialising to have changed over the past six months.
68% of respondents thought the probability of a high-impact event occurring in the short term had increased over the past six months (bottom panel of Chart 2). When considering the medium term, there was an increase of 17% in the number of participants that believed the probability had increased (bottom panel of Chart 3).
Sources of risk to the UK financial system
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 provided in free-text format, but have been grouped into the 22 categories shown in Table A2 in the data appendix to give an overview of the results.[3]
The risks most frequently cited in the 2019 H2 survey were (Chart 4):
- UK political risk (cited by 96% of respondents).
- Cyber-attack (61%).
- Geopolitical risk (58%).
- Risk of a global/overseas economic downturn (38%).
- Risk of financial market disruption/dislocation (31%).
- Risk of a UK economic downturn (23%).
- Operational risk (20%).
Chart 4 Sources of risk to the UK financial system — mentioned by respondents (a)(b)
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(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 selected for each answer. Chart figures are the percentages of respondents citing a given risk at least once, among respondents citing at least one key risk. The chart shows the top five categories; see the data appendix for additional categories.
(b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
Six of the top seven risks in the 2019 H2 survey had also featured in the top seven risks in the 2019 H1 survey. Risks around regulation/taxes was replaced by operational risk.
UK political risk remained the most cited risk to the UK financial system (mentioned by 96% of respondents).
The rankings of the cyber-attack and the geopolitical risk categories switched in 2019 H2, taking cyber-attack to second, cited by 61% of respondents, compared to 58% for geopolitical risk.
There was an increase in the proportion of respondents citing the risk of financial market disruption/dislocation (31%, +4 percentage points) and operational risk (20%, +13 percentage points). Both the risk of an overseas/global economic downturn and the risk of a UK economic downturn remained unchanged (38% and 23%, respectively).
The risks most frequently cited as respondents’ number one risk (Chart 5) were:
- UK political risk (79% of respondents viewed it as their number one risk).
- Cyber-attack (6%).
- Geopolitical risk (5%).
- Risk of an overseas/global economic downturn (5%).
Chart 5 ‘Number one’ sources of risk to the UK financial system (a)(b)
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(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, in order of potential impact (ie greatest impact first). Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was selected for each answer. Chart figures are the percentages of respondents citing a given risk as their number one key risk, among respondents citing at least one key risk. The chart shows the top four categories; see the data appendix for additional categories.
(b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
Most challenging risks to manage as a firm
Respondents were asked to indicate which three of the five risks they identified would be the most challenging to manage if they were to materialise.
UK political risk, cyber-attack and geopolitical risk were the most cited responses (Chart 6):
- UK political risk (75% of respondents).
- Cyber-attack (48%).
- Geopolitical risk (32%).
- Risk of a global/overseas economic downturn (21%).
- Risk of a UK economic downturn (14%).
- Risk of financial market disruption/dislocation (12%).
- Risk of financial institution failure/distress (8%).
Chart 6 Risks most challenging to manage as a firm (a)(b)
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) After respondents had listed the five risks they believed would have the greatest impact on the UK financial system if they were to materialise, they were asked which three of these risks they would find most challenging to manage as a firm. Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was selected for each answer. Chart figures are the percentages of respondents citing a given risk at least once, among respondents citing at least one key risk. The chart shows the top five categories only; see the data appendix for additional categories.
(b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
While the rankings of these most challenging risks remained broadly unchanged, the categories of UK political risk, cyber-attack and geopolitical risks all saw a decreased number of citing’s since 2019 H1 (-7 percentage points, -4 percentage points and -3 percentage points, respectively). Comparatively, the categories of risk of an overseas/global downturn, risk of a UK economic downturn and risk of financial market disruption all saw a slight increase (+7 percentage points, +8 percentage points and +2 percentage points, respectively) in the proportion of participants that saw them as most challenging risks to manage.
The Systemic Risk Survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008. It was published for the first time in November 2011. The survey results complement other sources of information used by the Bank to identify system-wide risks.
Since the 2009 H2 survey, short and medium term have been specifically identified as 0–12 months and 1–3 years respectively. These terms were not explicitly defined in earlier surveys.
These summary categories are adjusted over time in order to better capture current risks cited; risks cited in previous surveys have been regrouped into the new categories to ensure comparability across survey rounds.
Data appendix
A full set of results in Excel and the survey questionnaire are available at the end of this page.
-
Aggregate risks to the UK financial system (a)(b)
2016
2017
2018
2019
H1
H2
H1
H2
H1
H2
H1
H2
Probability of a high impact event in the UK financial system in the short term (c)
Very high
15
5
7
2
2
13
6
15
High
41
37
17
23
22
54
46
57
Medium
31
40
50
44
51
29
35
21
Low
10
13
24
29
24
3
12
6
Very low
3
4
2
2
1
0
1
0
Probability of a high impact event in the UK financial system in the medium term (c)
Very high
6
23
18
13
7
6
9
6
High
31
39
45
43
51
54
42
57
Medium
49
31
33
38
37
31
38
32
Low
14
6
4
7
6
9
10
4
Very low
0
0
1
0
0
0
1
1
Change in the probability over the past six months of a high-impact event in the UK financial system in the short term (d)
Increased
79
55
43
36
26
73
44
68
Unchanged
21
36
49
60
55
27
51
31
Decreased
0
9
9
3
18
0
5
1
Change in the probability over the past six months of a high-impact event in the UK financial system in the medium term (d)
Increased
48
69
52
55
31
38
26
43
Unchanged
51
30
44
42
63
61
73
56
Decreased
1
1
4
3
6
1
1
1
Confidence in the stability of the UK financial system as a whole over the next three years (e)
Complete confidence
1
2
0
1
0
1
1
0
Very confident
13
19
21
25
29
22
30
33
Fairly confident
76
60
69
64
66
70
63
60
Not very confident
10
19
10
10
6
7
6
7
No confidence
0
0
0
0
0
0
0
0
Change in confidence over the past six months (f)
Increased
1
5
11
3
7
1
2
4
Unchanged
51
46
61
69
78
58
77
73
Decreased
48
49
28
28
15
40
21
24
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) Entries are percentages of respondents and may not sum to 100% due to rounding.
(b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008. Due to insufficient space in this table, results prior to 2016 H1 have not been included.
(c) Respondents were asked what the probability of a high-impact event in the UK financial system was in their view, for both the short and medium term. Since the 2009 H2 survey, short and medium term have been specifically identified as 0–12 months and 1–3 years respectively. These terms were not explicitly defined in earlier surveys.
(d) Respondents were asked how the probability had changed over the past six months for the short and medium term. Since the 2009 H2 survey, short and medium term have been specifically identified as 0–12 months and 1–3 years respectively. These terms were not explicitly defined in earlier surveys.
(e) Respondents were asked how much confidence they had in the stability of the UK financial system as a whole over the next three years.
(f) Respondents were asked how their confidence had changed over the past six months. The question was asked from 2010 H1 onwards. -
Sources of risk to the UK financial system (a)(b)(c)
2016
2017
2018
2019
H1
H2
H1
H2
H1
H2
H1
H2
Sources of risk to the UK financial system (d)
UK political risk
72
86
81
91
91
97
93
96
Cyber-attack
48
34
51
57
62
66
60
61
Geopolitical risk
32
36
61
61
62
62
62
58
Risk of an overseas/global economic downturn
59
37
26
18
25
30
38
38
Risk of financial market disruption/dislocation
37
30
16
18
16
18
27
31
Risk of a UK economic downturn
31
24
29
34
26
30
23
23
Operational risk
18
16
12
10
8
3
7
20
Risks around regulation/taxes
28
29
29
29
23
16
19
17
Risk of financial institution failure/distress
7
28
12
11
11
10
12
14
Risk surrounding the low interest rate environment (e)
34
47
14
6
2
0
2
12
Risk of property price falls
25
29
22
23
20
19
14
11
Risks surrounding monetary and fiscal policy
13
17
18
27
32
20
14
10
Household/corporate credit risk
7
1
6
15
17
10
6
5
Other
4
15
17
5
7
9
7
4
Risk of infrastructure disruption
10
2
2
5
5
7
5
4
Funding risk
8
2
1
0
0
1
5
4
Risk of loss of confidence in the authorities
0
1
1
0
3
3
4
4
Inflation risk
0
9
6
5
6
6
6
2
Risk of lack of confidence in ratings, valuations and disclosure
4
0
1
1
1
0
0
1
Risks around public anger against, or distrust of, financial institutions
0
1
0
0
0
0
0
0
Risk of tightening in credit conditions
6
2
2
2
2
2
5
0
Sovereign risk
21
13
21
14
8
15
11
0
Number one source of risk to the UK financial system (f)
UK political risk
65
55
52
67
53
74
69
79
Cyber-attack
6
2
7
7
14
8
14
6
Geopolitical risk
1
1
16
7
11
3
5
5
Risk of an overseas/global economic downturn
8
7
2
1
5
2
2
5
Risks surrounding monetary and fiscal policy
0
3
1
2
0
1
1
2
Operational risk
3
2
3
0
1
1
1
2
Risk of a UK economic downturn
3
4
2
3
2
2
1
1
Risk of infrastructure disruption
1
1
0
0
0
0
2
0
Risk of financial market disruption/dislocation
1
5
3
2
2
3
2
0
Risks around regulation/taxes
1
1
1
2
5
3
0
0
Household/corporate credit risk
0
0
0
2
2
0
0
0
Risk of financial institution failure/distress
0
7
1
0
1
1
0
0
Funding risk
0
0
0
0
0
0
0
0
Inflation risk
0
0
3
0
0
0
1
0
Risks around public anger against, or distrust of, financial institutions
0
0
0
0
0
0
0
0
Risk of lack of confidence in ratings, valuations and disclosure
1
0
0
0
0
0
0
0
Risk of loss of confidence in the authorities
0
0
0
0
0
0
0
0
Other
0
1
0
1
1
0
0
0
Risk of property price falls
1
1
2
1
1
0
0
0
Sovereign risk
1
2
6
1
0
0
0
0
Risk of tightening in credit conditions
0
0
1
2
0
0
0
0
Risk surrounding the low interest rate environment (e)
6
5
0
1
1
0
0
0
Number of respondents citing at least one source of risk
71
94
101
96
87
89
81
84
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) Respondents were asked which five risks they believed would have the greatest impact on the UK financial system if they were to materialise, in order of potential impact (ie greatest impact first). Answers were provided in a free format and were subsequently coded into the above categories; only one category was selected for each answer. Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
(b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008. Due to insufficient space in this table, results prior to 2016 H1 have not been included.
(c) Figures are expressed as nearest whole integer, so may appear inconsistent with figures shown in the text of the survey.
(d) Percentages of respondents citing each risk at least once in their top five, among those citing at least one risk.
(e) The definition of this risk includes risks associated with a snapback in low rates to more normal levels, as well as risks directly associated with low rates.
(f) Percentages of respondents citing each risk as their number one risk (ie the risk with the greatest potential impact), among those citing at least one source of risk. -
Most challenging risks to manage as a firm (a)(b)(c)
2016
2017
2018
2019
H1
H2
H1
H2
H1
H2
H1
H2
UK political risk
53
64
62
70
52
80
82
75
Cyber-attack
38
28
47
45
51
55
52
48
Geopolitical risk
12
14
40
36
37
39
35
32
Risk of an overseas/global economic downturn
30
20
14
6
7
16
14
21
Risk of a UK economic downturn
17
11
11
14
12
10
6
14
Risk of financial market disruption/dislocation
28
18
8
10
12
9
10
12
Risks around regulation/taxes
23
20
15
15
15
7
11
8
Risk of financial institution failure/distress
0
19
4
7
4
4
8
8
Risk surrounding the low interest rate environment (d)
15
22
4
2
0
0
0
5
Risk of infrastructure disruption
8
2
0
4
4
5
4
4
Operational risk
13
8
10
4
8
1
3
4
Risks surrounding monetary and fiscal policy
7
9
7
11
15
6
1
3
Inflation risk
0
5
3
0
5
1
1
3
Household/corporate credit risk (e)
2
0
1
2
5
4
0
3
Risk of property price falls
7
7
4
12
5
7
6
1
Other
0
2
4
5
3
4
6
1
Funding risk
2
1
1
0
0
1
3
1
Risk of loss of confidence in the authorities (f)
0
1
1
0
0
0
1
1
Risk of lack of confidence in ratings, valuations and disclosure
3
0
1
1
1
0
0
1
Sovereign risk
13
5
11
5
3
5
8
0
Risk of tightening in credit conditions
0
0
1
0
1
2
1
0
Risks around public anger against, or distrust of, financial institutions
0
0
0
0
0
0
0
0
Cited at least one key risk, but did not cite any risk as challenging to manage (%)
15
6
9
13
16
8
12
13
Number of respondents citing at least one source of risk
71
94
101
96
87
89
81
84
Sources: Bank of England Systemic Risk Surveys and Bank calculations.
(a) After respondents had listed the five risks they believed would have the greatest impact on the UK financial system if they were to materialise, they were asked which three of these risks they would find most challenging to manage as a firm. Answers were provided in a free format and were subsequently coded into the above categories; only one category was selected for each answer. Risks cited in previous surveys have been regrouped into the categories used to describe the latest data. Table entries are the percentages of respondents citing each risk at least once in this second question, among those citing at least one source of risk.
(b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008. Due to insufficient space in this table, results prior to 2016 H1 have not been included.
(c) Figures are expressed as nearest whole integer, so may appear inconsistent with figures shown in the text of the survey.
(d) The definition of this risk includes risks associated with a snapback in low rates to more normal levels, as well as risks directly associated with low rates.
(e) The ‘Household/corporate credit risk’ value for 2018 H2 has been revised from 0 to 4.
(f) The ‘Risk of loss of confidence in the authorities’ value for 2018 H1 has been revised from 5 to 0. The ‘Risk of loss of confidence in the authorities’ value for 2019 H1 has been revised from 0 to 1.