Systemic Risk Survey Results - 2012 H2

This report presents the results of the 2012 H2 survey which was conducted between 24 September and 25 October.

Probability of a high-impact event and confidence in the UK financial system

• The perceived probability of a high-impact event in the short term has fallen back further relative to its 2011 H2 peak. 20% of respondents now consider the probability high or very high (-16 percentage points since 2012 H1) and 34% now consider it low (+11 percentage points).
• The perceived probability of a high-impact event in the medium term has also fallen back, though by slightly less and remains material. 41% of respondents considered it very high or high and 9% low.
• Confidence in the UK financial system has picked up to levels last seen in 2011 H1. 16% of respondents (+3 percentage points since 2012 H1) were completely confident or very confident in the stability of the UK financial system as a whole over the next three years, 71% fairly confident (+7 percentage points) and only 14% not very confident (-8 percentage points).

Sources of risk to the UK financial system

• The top seven risks considered to have the greatest impact on the UK financial system if they were to materialise were:
  sovereign risk (cited by 94% of respondents), the risk of an economic downturn (77%), risks around regulation/taxes (34%), funding risk (32%), the risk of financial institution failure/distress (25%), the risk of financial market disruption/dislocation (22%) and the risk of tighter credit conditions (16%).
• The top six of these were unchanged since the 2012 H1 survey. Sovereign risk is now cited by a greater proportion of respondents than previously recorded for any risk. The proportion of respondents citing funding risk has dropped noticeably (-13 percentage points on six months ago; -25 percentage points since its peak in 2011 H2).
• The proportion of respondents raising risks around public anger against, or distrust of, financial institutions jumped to 10% (up from 0% in 2012 H1), with the main concerns around repercussions from the Libor scandal. A new category of ‘risks surrounding the low interest rate environment’ — cited by 8% of respondents — was also added.

Risks most challenging to manage as a firm

• The top six risks respondents would find most challenging to manage as a firm were the same (and ranked in the same order) as the key risks listed above. The three most cited were sovereign risk (78% of respondents), risk of an economic downturn (41%) and risks around regulation/taxes (24%).

Survey results

Questionnaire

Data tables