Systemic Risk Survey Results - 2013 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 18 November 2013

This report presents the results of the 2013 H2 survey which was conducted between 23 September and 24 October.

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 continue to fall, setting new lows since the survey began in 2008. 55% (+5 percentage points since May 2013) of respondents now consider the probability low or very low over the next year, 16% (+3 percentage points) between one and three years ahead.
  • Confidence in the UK financial system has also risen. 18% (+1 percentage point) were completely confident or very confident in the stability of the UK financial system as a whole over the next three years, 78% fairly confident (+8 percentage points) and only 4% not very confident (-9 percentage points).

Sources of risk to the UK financial system

  • Perceptions of the two main risks to the UK financial system remain sovereign risk and the risk of an economic downturn, although citations of both have fallen: 74% of respondents mentioned the former (-3 percentage points since May 2013) and 67% (-12 percentage points) the latter. Concerns over sovereign risk continue to focus on Europe, but unsurprisingly given the uncertainty surrounding US debt ceiling negotiations that prevailed during the survey period, there was a sharp increase in concerns around US sovereign risk.
  • For the second survey in succession, risk surrounding the low interest rate environment was the fastest growing, with 43% of respondents citing it, up 17 percentage points since May 2013. Over half of the responses emphasised risks around low rates, with the remainder referring to risks associated with a snapback in those low rates to more normal levels. Perceived risk around property prices also rose, being mentioned by 36% of respondents, up 11 percentage points since the previous survey. Concerns were concentrated almost exclusively on the residential market, where responses focused on the risk of a house price correction.
  • Other top risks include regulation/taxes (cited by 41% of respondents, up 1 percentage point since May 2013), financial institution failure/distress (+4 percentage points to 30%) and operational risk (+1 percentage point to 25%). Outside of the top seven, geopolitical risk has grown in prominence, with concern focusing on instability in the Middle East.

Risks most challenging to manage as a firm

  • Six of the top seven key risks were also those listed as the most challenging to manage as a firm, but with a different ordering.
    Sovereign risk remains most widely cited as challenging to manage.

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PDF Questionnaire

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