Systemic Risk Survey Results - 2014 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 16 December 2014

This report presents the results of the 2014 H2 survey which was conducted between 22 September and 22 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 have
    increased, ending the downward trend since 2011 H2. 8% (+5 percentage points since the 2014 H1 survey) of respondents
    now consider the probability high or very high over the next year, 21% (+8 percentage points) between one and three years
  • However, confidence in the UK financial system has continued its upward trend. This has been driven by an increase in
    respondents who were very confident (36%, +13 percentage points since 2014 H1) rather than fairly confident
    (58%, -12 percentage points).

Sources of risk to the UK financial system

  • The two main risks to the UK financial system identified by respondents remain geopolitical risk (mentioned by 66% of
    respondents, +9 percentage points since 2014 H1) and the risk of an economic downturn (64%, +3 percentage points) with
    the former now the most cited risk. These are also the two most frequently cited number one risks. Responses on geopolitical
    risk focus mostly on the Russian/Ukrainian conflict and, to a somewhat lesser extent, on the Middle East/ISIS.
  • Perceived risks from regulation have ticked up slightly (+2 percentage points to 37%) while the risk of property price falls
    (36%, -5 percentage points) has fallen back to its level a year ago, ending an upward trend since the 2012 H2 survey.
    Concerns over sovereign risk (34%, -6 percentage points) continued to decrease for the fourth survey in succession and most
    often relate to concerns about the future of the euro area. Other top risks include those arising from the low interest rate
    environment (cited by 33% of respondents, down 6 percentage points since 2014 H1) and operational risk (29%, unchanged
    since 2014 H1). UK political risk, although still outside of the top seven most cited risks, also increased in prominence, in line
    with the electoral cycle (25%, +11 percentage points).

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 continues to be the risk category most widely cited as challenging to manage.

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