UK Financial System Risks at Highest Level Since 2019

LONDON (Reuters) – Concerns about risks to the UK financial system due to a global economic downturn have surged to their highest level since the second half of 2019, according to a Bank of England (BoE) survey released on Wednesday.

The BoE's biannual systemic risk survey, conducted from July 23 to August 12, gathered responses from 55 financial firms, asking them to identify the five risks they believed would significantly impact the UK financial system.

Key Findings

• One-third of participants expressed concerns about the implications of an overseas/global economic downturn, marking a 19 percentage point increase—the largest single rise since the last survey in March.
• The BoE noted that overall risks to British financial stability remained unchanged since its assessment in June, cautioning against assuming stability due to a rapid rebound in asset prices after the drop in August.

Frequently Cited Risks

The two predominant risks identified in the survey remained the same, reflecting previous findings:
– Geopolitical Risk: Cited by 93% of respondents, up 8 percentage points from the last survey.
– Cyber Attack: Mentioned by 80% of firms, an increase of 10 percentage points.

Participants reported various concerns under these categories, such as ongoing conflicts, global elections, and possible cyber attacks affecting the financial system, including infrastructure related to banking.

Climate Risk Trends

The percentage of respondents identifying climate risk has decreased in recent surveys to 29%, marking a decline of seven percentage points from the previous survey and the lowest level recorded since the second half of 2022.