The Bank of England has released the latest edition of The Systemic Risk Survey, which is conducted by the Bank of England 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. This report presents the results of the 2016 H1 survey which was conducted between 11 April and 29 April.
Probability of a high-impact event and confidence in the UK financial system
- The perceived probability of a high-impact event in the UK financial system over the short term has risen considerably. The
perceived probability of such an event over the medium term has increased slightly. 56% (+46 percentage points since the
2015 H2 survey) of respondents now consider the probability of a high-impact event as high or very high over the next year;
37% (+6 percentage points) between one and three years ahead. - Confidence in the stability of the UK financial system has fallen since the 2015 H2 survey. Respondents are less likely to judge themselves as very or completely confident (14%, -15 percentage points since the 2015 H2 survey) and more likely as not very confident (10%, +4 percentage points).
Sources of risk to the UK financial system
- The two risks to the UK financial system most cited by respondents were those of an economic downturn (mentioned by 73% of respondents, +1 percentage point since 2015 H2) and UK political risk, which increased significantly (+46 percentage points to 72%). UK political risk was also identified as the number one source of risk (+61 percentage points to 65%). In the history of this survey only one other risk has ever been identified by a larger proportion of respondents as their number one source of risk.
- Around half of respondents citing an economic downturn specifically referenced a slowdown in global economic growth,
rather than a UK-specific slowdown. - Almost all respondents that mentioned UK political risk explicitly referenced the possibility of the United Kingdom leaving the European Union.
- The perceived risk of a cyber attack increased, albeit marginally, for the third consecutive survey to a new survey high
(+2 percentage points to 48%). The proportion of respondents citing risk of financial market disruption/dislocation fell
slightly (-7 percentage points to 37%). Perceived risks surrounding the low interest rate environment rose (+13 percentage
points to 34%). Respondents perceived geopolitical risks to have fallen noticeably (-14 percentage points to 32%). The risks
around regulation and taxes have increased (+9 percentage points to 28%), driven by concerns over regulation rather than
taxation.
Risks most challenging to manage as a firm
- UK political risk was most commonly cited as the risk most challenging to manage. The percentage of respondents
mentioning this risk increased by 39 percentage points (14% to 53%). Only sovereign risk, in the period between 2011 and
2013, has ever been perceived as a more challenging risk to manage since this survey began in July 2008.
