Systemic Risk Survey Results - 2012 H2

The Systemic Risk Survey is conducted 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.
Published on 19 November 2012

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%).

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