How have firms’ views on financial stability risks in the UK changed over the past decade?

The purpose of Bank Overground is to share our internal analysis. Each bite-sized post summarises a piece of analysis that supported a policy or operational decision.
Published on 09 March 2020

We regularly survey market participants to find out how confident they are in the UK financial system and what risks they believe the system is facing. Firms are most concerned about political, geopolitical and cyber-risks, but overall confidence in the financial system remains high.

Every six months, we conduct a Systemic Risk Survey (SRS) to ask market participants how confident they are in the stability of 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 and pension funds.

The perceived risks to financial stability, as highlighted by market participants, have changed significantly over the past decade (Chart A). During the financial crisis, firms were concerned about financial institution distress, financial market disruption and property price falls.

Chart A

As memories of the crisis faded and reforms were implemented, other risks became more of a concern for firms. Between 2010 and end-2015, firms were worried about geopolitical risk, the risk of a global economic downturn, sovereign risk and the risks associated with low interest rates.

In the second half of the decade, firms viewed UK political risk, geopolitical risk and the risk of a cyber-attack as the key risks facing the UK financial system. Respondents also ranked political risk as the most difficult for them to manage.

Based on our survey data, we can see that the focus of respondents has shifted over the past decade, from financial risks to political risks. But their overall confidence in the financial system has remained high.

We will publish our next SRS in July 2020.

This post has been prepared with the help of Ryan Lovelock, Icaro Rebolledo and Lyndsey Pereira-Brereton.

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