Systemic Risk Survey Results - 2014 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 09 June 2014

This report presents the results of the 2014 H1 survey which was conducted between 07 April and 12 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 continue to fall, setting new lows since the Survey began in 2008. 64% (+9 percentage points since October 2013) of respondents now consider the probability low or very low over the next year, 28% (+12 percentage points) between one and three years ahead.
  • Confidence in the UK financial system on average has also risen, but only slightly. 24% (+5 percentage points) were completely confident or very confident in the stability of the UK financial system as a whole over the next three years, 69% fairly confident (-8 percentage points) but there has been a slight increase in respondents who were not very confident (+3 percentage points to 7%).

Sources of risk to the UK financial system

  • Citations of risks were less skewed towards one particular risk category and there was less consensus amongst respondents relative to the previous survey on both the number one key risk to UK financial stability and the risk most challenging to manage as a firm.
  • The main risk to the UK financial system identified was from an economic downturn, although citations have fallen: 61% of respondents mentioned this risk (-6 percentage points since October 2013). Perhaps unsurprisingly given the tensions in Ukraine, the importance of geopolitical risk (mentioned by 57% of respondents) grew markedly from a low base. This is now the second most cited risk. Concerns around sovereign risk (cited by 40% of participants, down by 33 percentage points) have dropped sharply but remain important, with the overwhelming majority of specific responses focusing on the eurozone.
  • Risk of property price falls continued to rise for the third survey in succession, cited by 40% of respondents. Other top risks include those arising from the low interest rate environment (cited by 39% of respondents, down 5 percentage points since October 2013), risks around regulation/taxes (-6 percentage points to 35%) and operational risk (+4 percentage points to 29%). Outside of the top seven risks, household/corporate credit risk, UK political risk and risks surrounding monetary and fiscal policy have grown in prominence.

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. Geopolitical risk is now the risk category most widely cited as challenging to manage.

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