Systemic Risk Survey Results - 2013 H1

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 17 June 2013

This report presents the results of the 2013 H1 survey which was conducted between 22 April and 22 May.

Probability of a high-impact event and confidence 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 have fallen to their lowest levels since the survey began in 2008. Only 8% of respondents (-12 percentage points since October 2012) now consider the probability high or very high over the next year, 24% (-17 percentage points) between one and three years ahead.
  • Confidence in the UK financial system has picked up slightly. 17% (+2 percentage points since October 2012) were completely confident or very confident in the stability of the UK financial system as a whole over the next three years, 70% fairly confident (-1 percentage point) and only 13% not very confident (-1 percentage point).

Sources of risk to the UK financial system

  • The two main risks to the UK financial system remain an economic downturn and sovereign — principally euro area — risk, cited by 79% (+2 percentage points since October 2012) and 76% (-17 percentage points) of respondents respectively. Citations of risks around regulation/taxes, up 5 percentage points to 39%, remain around similar levels to the past couple of years, with one in five respondents pointing to this risk citing the Financial Transactions Tax.
  • There are three new entrants to the top seven risks: the risk of property price falls (cited by 25% of respondents, up 11 percentage points), operational risk (up 10 percentage points to 24%), where ‘cyber’ security was most frequently mentioned, and risks surrounding the low interest rate environment (the fastest growing risk, up 16 percentage points to 24%). Participants’ perceptions of an increased risk of property price falls (in particular residential property price falls) could be consistent with views of prices becoming overinflated or about to become overinflated. Responses in the low interest rate category focused on the risk that artificially low interest rates are creating distortions in asset allocation, potentially leading to overinflated risky asset prices.
  • Funding risk saw a particularly noticeable drop-off, with only 17% of respondents citing it as a key risk (down 15 percentage points since October 2012).

Risks most challenging to manage as a firm

  • Respondents indicated they would find six of the top seven key risks the most challenging to manage as a firm, but with a slightly different ordering. The three most cited were sovereign risk (63% of respondents), the risk of an economic downturn (42%) and risks around regulation/taxes (34%).

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