Systemic Risk Survey Results - 2024 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 27 March 2024

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.[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 2024 H1 survey, which was conducted between 30 January and 22 February.

66 firms participated in the 2024 H1 survey, representing a 79% response rate.

Key results from 2024 H1 survey

  • Survey respondents remain confident in the stability of the UK financial system, reporting a similar level of confidence to 2023 H2.
  • The perceived probability of a high-impact event affecting the UK financial system in both the short term and medium term has fallen further.
  • Geopolitical risk and cyber attack remain the most frequently cited risks among participants. The proportion of respondents citing geopolitical risk is at its highest level recorded in the survey. These risks are also considered the most challenging to manage by a majority of respondents.
  • The number of survey respondents citing inflation risk has decreased sharply since the 2023 H2 survey.
  • The share of respondents citing risks to financial stability from artificial intelligence has continued to grow.

Confidence in the UK financial system

Respondents were asked about the level of confidence they have in the stability of the UK financial system 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 H2.

  • 29% of respondents judge themselves completely or very confident in the stability of the UK financial system (-1 percentage points relative to the 2023 H2 survey).
  • 65% of respondents judge themselves fairly confident (+2 percentage points).
  • 6% of respondents judge themselves not very confident (-1 percentage points).

Chart 1: Confidence in the stability of the UK financial system over the next three years (a)

This is a stacked column chart showing a weighted measure of respondents' confidence in the stability of the UK's financial system over the next three years. The series shown is between 2008–24. The stacked columns are overlaid with a line indicating high confidence with a net percentage balance of 11.4%. Series high: 22.4% in 2021 H2. Series low: -9% in 2009 H2.
  • 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.[2]

Charts 2 and 3 represent results in one weighted measure, with bars representing contributions to the net percentage balance, while the figures below and in Table A1 refer to simple percentages.

Respondents judge that the likelihood of a high-impact event over the short term is little changed compared to the previous survey and is lower over the medium term.

Over the short term (0–12 months):

  • 24% of all respondents consider the likelihood of a high-impact event to be high (-12 percentage points).
  • No respondents that consider the likelihood of a high-impact event to be very high (-2 percentage points).
  • Half of all respondents judged the likelihood of a high-impact event as medium: an increase from 32% in 2023 H2 (+18 percentage points).
  • Respondents judging a low or very low likelihood of a high-impact event decreased to 26% (-4 percentage points).

Chart 2: Probability of a high-impact event in the UK financial system over the short term (a) (b)

This is a stacked column chart showing a weighted measure of respondents' perceptions of the probability of a high-impact event occurring in 0–12 months. The series shown is between 2008–24. The stacked columns are overlaid with a line, showing a measure of overall perception of the probability of such an event. Respondents feel that the probability of a high-impact event occurring in the short term has decreased over the past six months, with a net percentage balance of -2.3% in this survey. Series high: 41.1% in 2019 H2. Series low: -36.1% in 2014 H1.
  • 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) Bars show the contribution of each component to the net percentage balance. 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).

Over the medium term:

  • 46% of respondents judge that the probability of a high-impact event over the medium term is high (38%, -12 percentage points) or very high (8%, +1 percentage points).
  • 15% consider this likelihood to be low (+6 percentage points).
  • No respondents consider the probability of a high-impact event over the medium term to be very low.

Chart 3: Probability of a high-impact event in the UK financial system over the medium term (a) (b)

This is a stacked column chart showing a weighted measure of respondents' perceptions of the probability of a high-impact event occurring in 1–3 years. The series shown is between 2008–24. The columns are overlaid with a line, showing a measure of overall perception of the probability of such an event. Respondents feel that the probability of a high-impact event occurring in the medium term has decreased over the past six months, with a net percentage balance of 18.9% in 2024 H1. Series high: 43.8%. Series low: -7.6% in 2014 H1.
  • 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. To give an overview of the results, answers, which were provided in free-text format, have been grouped into the 26 categories shown in Table A2.[3] Below is a list of the risks that were most frequently cited by the respondents in the 2024 H1 survey as one of their top five risks (Chart 4):

1. Geopolitical risk (cited by 85% of respondents, +19 percentage points since the 2023 H2 survey).

2. Cyber attack (70%, -10 percentage points).

3. Risks associated with a UK economic downturn (44%, -8 percentage points).

4. Inflation risk (41%, -16 percentage points).

5. Climate risk (36%, -3 percentage points).

The risks most commonly cited by market participants as their ‘number one’ source of risk to the UK financial system (Chart 5) were:

1. Geopolitical risk (cited by 41% of respondents, +18 percentage points since the 2023 H2 survey).

2. Cyber attack (21%, -6 percentage points).

3. Risks associated with a UK economic downturn (12%, +4 percentage points).

Geopolitical risk and cyber attack remain the most frequently cited perceived sources of risk to the financial system among financial market participants. The proportion of respondents citing geopolitical risk is at its highest level recorded in the survey.

The proportion of respondents who consider inflation risk among the key sources of risk to the financial system has decreased sharply since the 2023 H2 survey.

  • The two most frequently cited risks – geopolitical risk and cyber attack – are the same as in the 2023 H2 survey, with several respondents drawing a connection between the categories. Upcoming elections globally, ongoing conflicts, and the resilience of key infrastructure were among the specific concerns cited.
  • The share of respondents citing inflation risk in (a) their top five risks, or (b) as their number one risk, decreased to 41% (-16 percentage points) and 5% (-9 percentage points) respectively.
  • Other significant changes include an increase in respondents citing household/corporate credit risk within their top five risks (20%, +13 percentage points).
  • Risks surrounding artificial intelligence were cited by 14% of respondents, double the share of respondents in the previous survey.
  • The share of respondents citing risk of financial market disruption/dislocation decreased to 14% (-7 percentage points) along with operational risk (excluding cyber attack) which decreased to 12% (-8 percentage points).

Chart 4: Perceived key sources of risk to the UK financial system (a) (b)

This is a line chart showing the proportion of respondents to the survey that cited each risk between 2008–24. Geopolitical risk and cyber attack were each cited by at least 70% of respondents in 2024 H1. Perceived risks associated with a inflation risk decrease sharply.
  • 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.

Chart 5: ‘Number one’ sources of risk to the UK financial system (a) (b)

This is a line chart showing the proportion of respondents to the survey that cited each risk as the most impactful if it were to materialise, between 2008–24. The top two risks considered most impactful in 2024 H1 are geopolitical risk (cited by 41% of respondents) and cyber attack (21%).
  • 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, should they materialise.

Geopolitical risk and cyber attack are still considered to be most challenging to manage for a majority of firms.

The most cited risks are shown below (Chart 6):

1. Geopolitical risk (70% of respondents, +24 percentage points since the 2023 H2 survey).

2. Cyber attack (59%, -11 percentage points).

3. Risks associated with a UK economic downturn (18%, -11 percentage points).

4=. Household/corporate credit risk (16%, +14 percentage points).

4=. Inflation risk (16%, -25 percentage points).

4=. Climate risk (16%, -4 percentage points).

Chart 6: Risks most challenging to manage as a firm (a) (b)