Overview
The Bank of England’s financial stability objective is to protect and enhance the stability of the financial system of the United Kingdom. The Systemic Risk Survey contributes to this objective by quantifying and tracking, on a biannual basis, market participants’ views of risks to, and their confidence in, the stability of the UK financial system.footnote [1]
The survey is generally completed by executives responsible for firms’ risk management or treasury functions. The results presented are based on responses to the survey and do not necessarily reflect the Bank of England’s views on risks to the UK financial system. Participants include UK banks and building societies, large foreign banks, asset managers, hedge funds, insurers, pension funds, large non-financial companies and central counterparties. Summary statistics are calculated by giving equal weight to each survey response.
Additional background information on the survey is available in the 2009 Q3 Quarterly Bulletin article Bank of England Systemic Risk Survey.
This report presents the results of the 2023 H2 survey, which was conducted between 14 August and 8 September.
56 firms participated in the 2023 H2 survey, representing a 65% response rate.
Key results from 2023 H2 survey
- Survey respondents remain confident in the stability of the UK financial system and reported a similar level of confidence to 2023 H1.
- The perceived probability of a high-impact event affecting the UK financial system in both the short term and medium term is lower than judged in the previous survey.
- Cyber attack and geopolitical risks remain the most frequently cited risks among participants. The number of participants citing risks associated with a UK economic downturn has continued to increase sharply.
- The number of survey respondents citing inflation risk has slightly increased after having decreased in the previous survey.
- The risk of cyber attack, geopolitical risk and inflation risk are still considered the most challenging for firms to manage by a significant margin.
- A number of respondents flagged artificial intelligence as posing new risks to financial stability.
Confidence in the UK financial system
Respondents were asked about the level of confidence they have in the stability of the UK financial system as a whole over the next three years.
Chart 1 represents the results in one weighted measure, while the figures below and in Table A1 refer to simple percentages.
Survey participants reported a similar level of confidence in the UK financial system to 2023 H1.
- 30% of respondents judge themselves as completely or very confident (+5 percentage points relative to the 2023 H1 survey).
- 63% of respondents judge themselves as being fairly confident in the UK financial system (-7 percentage points).
- 7% of respondents judge themselves as being not very confident (+2 percentage points).
Chart 1: Confidence in the stability of the UK financial system as a whole over the next three years (a)
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Respondents were asked how much confidence they had in the stability of the UK financial system as a whole over the next three years. The net percentage balance is calculated by weighting responses as follows: complete confidence (1), very confident (0.5), fairly confident (0), not very confident (-0.5) and no confidence (-1). Bars show the contribution of each component to the net percentage balance.
Probability of a high-impact event in the UK financial system
Respondents were asked for their view on the probability of a high-impact event in the UK financial system in the short and medium term.footnote [2]
Charts 2 and 3 represent results in one weighted measure, while the figures below and in Table A1 refer to simple percentages.
Respondents judge that the likelihood of a high-impact event is lower than judged in the previous survey over the short term and medium term.
Over the short term (0–12 months):
- 38% of all respondents consider the likelihood of a high-impact event to be high (36%, -10 percentage points) or very high (2%, -4 percentage points).
- Respondents judging a low or very low likelihood of a high-impact event increased to 30% (+15 percentage points).
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Respondents were asked the probability of a high-impact event in the UK financial system in the short term. And also, how they thought this probability had changed over the past six months. From the 2009 H2 survey onwards, short term was defined as 0–12 months.
- (b) The net percentage balance in this chart is calculated by weighting responses as follows: very high (1), high (0.5), medium (0), low (-0.5) and very low (-1). Bars show the contribution of each component to the net percentage balance.
Over the medium term:
- 57% of respondents judge that the probability of a high-impact event over the medium term is high (50%, -6 percentage points) or very high (7%, -4 percentage points).
- 9% consider this likelihood to be low or very low (+3 percentage points).
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Respondents were asked the probability of a high-impact event in the UK financial system in the medium term, and how they thought this probability had changed over the past six months. From the 2009 H2 survey onwards, medium term was defined as 1–3 years.
- (b) See footnote (b) of Chart 2.
Sources of risk to the UK financial system
Respondents were asked to list the five risks they thought would have the greatest impact on the UK financial system if they were to materialise. Answers were provided in free-text format, but have been grouped into the 26 categories shown in Table A2 in the data appendix to give an overview of the results.footnote [3] Below is a list of the risks that were most frequently cited by the respondents in the 2023 H2 survey as one of their top five risks (Chart 4):
1. Cyber attack (cited by 80% of respondents, +5 percentage points since the 2023 H1 survey).
2. Geopolitical risk (66%, -13 percentage points).
3. Inflation risk (57%, +4 percentage points).
4. Risks associated with a UK economic downturn (52%, +20 percentage points).
5. Climate risk (39%, unchanged).
Within this, the risks most commonly cited by market participants as their ‘number one’ source of risk to the UK financial system (Chart 5) were:
1. Cyber attack (cited by 27% of respondents, +17 percentage points since the 2023 H1 survey).
2. Geopolitical risk (23%, -5 percentage points).
3. Risks associated with a UK economic downturn (16%, +2 percentage points).
4. Inflation risk (14%, -11 percentage points).
Cyber attack and geopolitical risk remain the most frequently cited perceived sources of risk to the financial system among financial market participants. The proportion of respondents citing cyber risk is at its highest level recorded in the survey.
The proportion citing UK economic downturn has increased steeply since the period pre-Covid, cited by more than half of respondents for the first time since 2013 H1.
Relative to the 2023 H1 survey, the proportion of respondents who consider inflation risk among the key sources of risk to the financial system increased slightly after having decreased in the previous survey. However, the proportion citing inflation risk as the number one risk they were concerned about fell sharply.
Risks surrounding artificial intelligence, a new category, were mentioned by 7% of respondents. Participants cited a number of related concerns, including increased frictions in the labour market, and the potential for increased financial crime.
- The three most frequently cited risks – geopolitical risk, cyber attack and inflation risk were also those most frequently cited in the previous survey. Respondents cited a range of concerns including the Russia‑Ukraine conflict, artificial intelligence, technology advancement and the resilience of key market infrastructures.
- Respondents citing climate risk identified both risks from the transition to a low-carbon economy, as well as physical risks arising from climate related disasters like extreme weather events.
- Outside of the top five risks above, significant changes include respondents citing risks of financial market disruption/dislocation which has increased to 21% (+9 percentage points), while the risk of financial institution failure/distress is cited by 14% of participants (+9 percentage points).
- The share of respondents citing UK political risk decreased to 16% (-12 percentage points) and risks associated with an overseas/global economic downturn decreased to 16% (-6 percentage points).
- The share of respondents citing inflation risk in their top five risks increased to 57% (+4 percentage points), while the share citing it as the number one risk to financial stability fell sharply to 14% (-11%).
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Respondents were asked to list the five risks they thought would have the greatest impact on the UK financial system if they were to materialise. Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was selected for each answer. Chart figures are the percentages of respondents citing a given risk at least once, among respondents citing at least one key risk. The chart shows the top five categories; see the data appendix for additional categories.
- (b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Respondents were asked to list the five risks they thought would have the greatest impact on the UK financial system if they were to materialise, in order of potential impact (ie greatest impact first). Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was selected for each answer. Chart figures are the percentages of respondents citing a given risk as their number one key risk, among respondents citing at least one key risk. The chart shows ‘number one’ sources of risk that have been cited by at least 20% of respondents in a given survey; see the data appendix for more detail.
- (b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
Most challenging risks to manage as a firm
Respondents were asked to rank which of the five risks they identified would be the most challenging to manage if they were to materialise.
The most cited risks are shown below (Chart 6):
1. Cyber attack (70% of respondents, +20 percentage points since the 2023 H1 survey).
2. Geopolitical risk (46%, -2 percentage points).
3. Inflation risk (41%, +1 percentage points).
4. Risks associated with a UK economic downturn (29%, +5 percentage points).
5. Climate risk (20%, +4 percentage points).
Cyber attack, geopolitical risk and inflation risk are still considered to be most challenging to manage for a majority of firms.
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) After respondents had listed the five risks they believed would have the greatest impact on the UK financial system if they were to materialise, they were asked which three of these risks they would find most challenging to manage as a firm. Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was selected for each answer. Chart figures are the percentages of respondents citing a given risk at least once, among respondents citing at least one key risk. The chart shows the top five categories only; see the data appendix for additional categories.
- (b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
- The three risk categories cited as most challenging are unchanged since the previous survey, though the proportion citing cyber risks as most challenging to manage has increased significantly.
- Outside of the top five risks shown above, the proportion of respondents citing the risk of financial institution failure/distress as one of their most challenging risks to manage was at its highest since 2016 H2, at 9%.
Key risks most likely to materialise
Respondents were asked to rank which of the five risks they thought would be the most probable to materialise.footnote [4]
The most cited risks are shown below (Chart 7):
1. Inflation risk (52% of respondents, +7 percentage points since the 2023 H1 survey).
2. Cyber attack (46%, +8 percentage points).
3. Geopolitical risk (41%, -12 percentage points).
4. Risks associated with a UK economic downturn (39%, +14 percentage points).
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) After respondents had listed the five risks they believed would have the greatest impact on the UK financial system if they were to materialise, they were asked which three of these risks they thought were most likely to materialise. Answers were in a free-text format and were grouped into categories after the questionnaires had been submitted; only one category was selected for each answer. Chart figures are the percentages of respondents citing a given risk at least once, among respondents citing at least one key risk.
- (b) Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
- (c) The risks presented in this chart include only those cited as most likely to materialise by at least 5% of respondents. Please refer to Table A4 in the data appendix for details.
- Inflation risk, cyber attack and geopolitical risk continue to be considered the most likely risks to materialise by respondents.
- Concern around inflation risk has increased since the previous survey to 52%, with a 7 percentage points increase in respondents citing this as one of the most likely risks to materialise.
- Perceived risks surrounding monetary/fiscal policy have increased, and are considered most likely to materialise by 7% of respondents (+6 percentage points), while risk of an overseas economic downturn has decreased and is now considered likely by 7% of respondents (-6 percentage points).
Data appendix
Aggregate risks to the UK financial system (a) (b)
2018 H2
2019 H1
2019 H2
2021 H2
2022 H1
2022 H2
2023 H1
2023 H2
Probability of a high-impact event in the UK financial system in the short term (c)
Very high
13
6
15
3
1
14
6
2
High
54
46
57
19
30
48
46
36
Medium
29
35
21
48
46
35
33
32
Low
3
12
6
24
21
3
14
27
Very low
0
1
0
5
1
0
1
4
Probability of a high-impact event in the UK financial system in the short term (c)
Very high
6
9
6
9
9
17
11
7
High
54
42
57
43
37
55
56
50
Medium
31
38
32
40
53
26
28
34
Low
9
10
4
9
1
2
6
9
Very low
0
1
1
0
0
0
0
0
Change in the probability over the past six months of a high-impact event in the UK financial system in the short term (d)
Increased
73
44
68
7
39
83
51
23
Unchanged
27
51
31
57
51
15
35
59
Decreased
0
5
1
36
10
2
14
18
Change in the probability over the past six months of a high-impact event in the UK financial system in the medium term (d)
Increased
38
26
43
22
33
69
42
27
Unchanged
61
73
56
66
61
29
51
70
Decreased
1
1
1
12
6
2
7
4
Confidence in the stability of the UK financial system as a whole over the next three years (e)
Complete confidence
1
1
0
0
1
0
1
2
Very confident
22
30
33
50
44
42
24
29
Fairly confident
70
63
60
45
51
55
69
63
Not very confident
7
6
7
5
3
3
6
7
No confidence
0
0
0
0
0
0
0
0
Change in confidence over the past six months (f)
Increased
1
2
4
22
9
0
7
7
Unchanged
58
77
73
72
81
71
50
80
Decreased
40
21
24
5
10
29
43
13
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Entries are percentages of respondents and may not sum to 100% due to rounding.
- (b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008.
- (c) Respondents were asked what the probability of a high-impact event in the UK financial system was in their view, for both the short and medium term. Since the 2009 H2 survey, short and medium term have been specifically identified as 0–12 months and 1–3 years respectively. These terms were not explicitly defined in earlier surveys.
- (d) Respondents were asked how the probability had changed over the past six months for the short and medium term. Since the 2009 H2 survey, short and medium term have been specifically identified as 0–12 months and 1–3 years respectively. These terms were not explicitly defined in earlier surveys.
- (e) Respondents were asked how much confidence they had in the stability of the UK financial system as a whole over the next three years.
- (f) Respondents were asked how their confidence had changed over the past six months. The question was asked from 2010 H1 onwards.
Sources of risk to the UK financial system (a) (b) (c) (d)
2018 H2
2019 H1
2019 H2
2021 H2
2022 H1
2022 H2
2023 H1
2023 H2
Cyber attack
66
60
61
74
79
74
75
80
Geopolitical risk
62
62
58
59
63
72
79
66
Inflation risk
6
6
2
33
63
72
53
57
Risks associated with a UK economic downturn
30
23
23
12
14
20
32
52
Climate risk
1
4
15
33
24
23
39
39
Risk of financial market disruption/dislocation
18
27
31
31
24
17
13
21
Operational risk
3
4
6
21
29
20
21
20
Risks associated with an overseas/global economic downturn
30
38
38
14
6
20
22
16
UK political risk
97
93
96
40
26
34
28
16
Risk of financial institution failure/distress
10
12
14
7
4
6
6
14
Other
9
7
4
21
18
23
19
14
Risk of property price falls
19
14
11
12
13
3
10
11
Risks around regulation/taxes
16
19
17
21
9
6
17
11
Risks surrounding monetary and fiscal policy
20
14
10
9
4
5
7
9
Funding risk
1
5
4
0
3
2
7
9
Household/corporate credit risk
10
6
5
7
9
8
10
7
Household/corporate credit risk
10
6
5
7
9
8
10
7
Risks surrounding artificial intelligence
0
0
0
0
0
0
0
7
Risk of infrastructure disruption
1
1
1
1
1
1
1
7
Pandemic risk
0
0
0
57
51
31
8
5
Risk of tightening in credit conditions
2
5
0
5
11
17
8
5
Risk of loss of confidence in the authorities
3
4
4
2
1
0
3
2
Sovereign risk
15
11
0
0
1
2
4
2
Risks around public anger against, or distrust of, financial institutions
0
0
0
0
3
5
1
0
Risk surrounding cryptocurrencies
0
0
0
0
3
0
0
0
Risk of lack of confidence in ratings, valuations and disclosure
0
0
1
0
0
0
3
0
Risk surrounding the low interest rate environment (e)
0
2
12
3
0
0
0
0
Number one source of risk to the UK financial system (f)
Cyber attack
8
14
6
19
34
17
10
27
Geopolitical risk
3
5
5
2
13
17
28
23
Risks associated with a UK economic downturn
2
1
1
2
6
8
14
16
Inflation risk
0
1
0
12
23
38
25
14
Risk of financial market disruption/dislocation
3
2
0
3
1
3
0
5
Risks surrounding monetary and fiscal policy
1
1
2
2
1
3
1
4
Risk of financial institution failure/distress
1
0
0
2
1
0
0
2
Risk of property price falls
0
0
0
0
0
0
3
2
Funding risk
0
0
0
0
0
0
0
2
Risks surrounding artificial intelligence
0
0
0
0
0
0
0
2
Risk of infrastructure disruption
0
2
0
0
0
0
1
2
Sovereign risk
0
0
0
0
0
0
1
2
Household/corporate credit risk
0
0
0
0
0
2
3
0
Risks associated with an overseas/global economic downturn
2
2
5
2
0
3
4
0
UK political risk
74
69
79
10
1
2
1
0
Risks around regulation/taxes
3
0
0
3
1
3
1
0
Climate risk
1
1
1
3
0
2
0
0
Risk of tightening in credit conditions
0
0
0
2
3
2
1
0
Other
0
0
0
0
3
0
1
0
Operational risk
0
0
1
0
0
0
1
0
Risks around public anger against, or distrust of, financial institutions
0
0
0
0
0
0
1
0
Risk surrounding the low interest rate environment
0
0
0
0
0
0
0
0
Risk of lack of confidence in ratings, valuations and disclosure
0
0
0
0
0
0
0
0
Risk of loss of confidence in the authorities
0
0
0
0
0
0
1
0
Pandemic risk
0
0
0
38
11
2
0
0
Risk surrounding cryptocurrencies
0
0
0
0
0
0
0
0
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) Respondents were asked which five risks they believed would have the greatest impact on the UK financial system if they were to materialise, in order of potential impact (ie greatest impact first). Answers were provided in a free-text format and were subsequently coded into the above categories; only one category was selected for each answer. Risks cited in previous surveys have been regrouped into the categories used to describe the latest data.
- (b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008.
- (c) Figures are expressed as nearest whole integer, so may appear inconsistent with figures shown in the text of the survey.
- (d) Percentages of respondents citing each risk at least once in their top five, among those citing at least one risk.
- (e) The definition of this risk includes risks associated with a snapback in low rates to more normal levels, as well as risks directly associated with low rates.
- (f) Percentages of respondents citing each risk as their number one risk (ie the risk with the greatest potential impact), among those citing at least one source of risk.
Risks most challenging to manage as a firm (a) (b) (c)
2018 H2
2019 H1
2019 H2
2021 H2
2022 H1
2022 H2
2023 H1
2023 H2
Cyber attack
55
52
48
58
65
56
50
70
Geopolitical risk
39
35
32
32
40
48
49
46
Inflation risk
1
1
3
23
46
61
40
41
Risks associated with a UK economic downturn
10
6
14
7
4
13
24
29
Climate risk
1
3
4
21
15
13
15
20
Risks associated with an overseas/global economic downturn
16
14
21
4
4
6
11
11
Operational risk
0
0
0
9
18
11
11
11
Funding risk
1
3
1
0
1
2
6
9
Risk of financial institution failure/distress
4
8
8
5
4
5
0
9
UK political risk
80
82
75
25
10
14
11
7
Risk of infrastructure disruption
5
4
4
2
0
0
1
7
Other
4
6
1
16
13
6
13
5
Risk of financial market disruption/dislocation
9
10
12
12
10
11
3
5
Risk of tightening in credit conditions
2
1
0
4
4
11
3
4
Risks around regulation/taxes
7
11
8
16
6
5
11
4
Risks surrounding monetary and fiscal policy
6
1
3
4
4
3
3
4
Household/corporate credit risk
4
0
3
7
4
5
7
2
Risk of property price falls
7
6
1
4
3
0
6
2
Risks surrounding artificial intelligence
0
0
0
0
0
0
0
2
Sovereign risk
5
8
0
0
0
0
3
2
Pandemic risk
0
0
0
40
29
9
4
0
Risk of loss of confidence in the authorities
0
1
1
0
0
0
3
0
Risk surrounding the low interest rate environment (d)
0
0
5
0
0
0
0
0
Risks around public anger against, or distrust of, financial institutions
0
0
0
0
1
3
0
0
Risk of lack of confidence in ratings, valuations and disclosure
0
0
1
0
0
0
0
0
Risk surrounding cryptocurrencies
0
0
0
0
0
0
0
0
Cited at least one key risk, but did not cite any risk as challenging to manage (%)
8
12
13
0
0
0
0
0
Number of respondents citing at least one source of risk
89
81
84
58
70
65
72
56
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) After respondents had listed the five risks, they believed would have the greatest impact on the UK financial system if they were to materialise, they were asked which three of these risks they would find most challenging to manage as a firm. Answers were provided in a free-text format and were subsequently coded into the above categories; only one category was selected for each answer. Risks cited in previous surveys have been regrouped into the categories used to describe the latest data. Table entries are the percentages of respondents citing each risk at least once in this second question, among those citing at least one source of risk.
- (b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008.
- (c) Figures are expressed as nearest whole integer, so may appear inconsistent with figures shown in the text of the survey.
- (d) The definition of this risk includes risks associated with a snapback in low rates to more normal levels, as well as risks directly associated with low rates.
Risks most probable to materialise (a) (b) (c)
2022 H1
2022 H2
2023 H1
2023 H2
Inflation risk
58
63
45
52
Cyber attack
55
37
38
46
Geopolitical risk
36
54
54
41
Risks associated with a UK economic downturn
10
20
25
39
Climate risk
10
9
11
16
Operational risk
10
6
11
14
Risk of financial market disruption/dislocation
13
6
3
11
Funding risk
1
2
6
9
Risk of property price falls
4
2
8
9
UK political risk
9
18
8
9
Risks surrounding monetary/fiscal policy
3
5
1
7
Risks associated with an overseas economic downturn
3
18
13
7
Risks surrounding artificial intelligence
0
0
0
5
Household/corporate credit risk
4
5
8
4
Risk of infrastructure disruption
0
0
1
4
Other
15
15
13
4
Risk around regulation/taxes
4
2
7
4
Risk of tightening in credit conditions
7
17
6
4
Pandemic risk
36
2
0
4
Sovereign risk
0
2
1
2
Risk of financial institution failure/distress
1
2
1
0
Risks around public anger against, or distrust of, financial institutions
0
5
0
0
Risk of lack of confidence in ratings, valuations and disclosure
0
0
0
0
Risk of loss of confidence in the authorities
1
0
3
0
Risks surrounding low interest rate environment (d)
0
0
0
0
Risks surrounding cryptocurrencies
0
0
0
0
Cited at least one key risk, but did not cite any risk as most likely to materialise (%)
0
0
0
0
Number of respondents citing at least one source of risk
70
65
72
56
Footnotes
- Sources: Bank of England Systemic Risk Surveys and Bank calculations.
- (a) After respondents had listed the five risks, they believed would have the greatest impact on the UK financial system if they were to materialise, they were asked which three of these risks was most probable to materialise. This element of the survey was introduced in 2021 H2. Answers were provided in a free format and were subsequently coded into the above categories; only one category was selected for each answer. Risks cited in previous surveys have been regrouped into the categories used to describe the latest data. Table entries are the percentages of respondents citing each risk at least once in this second question, among those citing at least one source of risk.
- (b) The survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008.
- (c) Figures are expressed as nearest whole integer, so may appear inconsistent with figures shown in the text of the survey.
- (d) The definition of this risk includes risks associated with a snapback in low rates to more normal levels, as well as risks directly associated with low rates.
The Systemic Risk Survey has been undertaken biannually since 2009, following a pilot survey conducted in July 2008. It was published for the first time in November 2011. The survey results complement other sources of information used by the Bank to identify system-wide risks.
Since the 2009 H2 survey, short and medium term have been specifically identified as 0–12 months and 1–3 years respectively. These terms were not explicitly defined in earlier surveys.
These summary categories are adjusted over time in order to better capture current risks cited. Risks cited in previous surveys have been regrouped into the new categories to ensure comparability across survey rounds.
This question was introduced in the 2021 H2 survey.