The latest Systemic Risk Survey conducted by the Bank of England reveals that market participants maintain a high level of confidence in the stability of the UK financial system.
The survey, which collected responses from 56 firms, representing a robust 65% response rate, offers a comprehensive overview of market sentiment regarding risks and stability in the UK financial sector.
According to the survey results, 30% of respondents expressed complete or very high confidence in the UK financial system over the next three years, marking a 5-percentage point increase since the 2023 H1 survey.
Meanwhile, 63% reported feeling fairly confident, a decrease of 7 percentage points, and 7% expressed low confidence, representing a 2-percentage point increase.
Respondents have assessed the probability of a high-impact event affecting the UK financial system as lower than in the previous survey. Over the short term (0–12 months), 38% of participants consider the likelihood of such an event to be high or very high, a 10-percentage point decrease from the previous survey.
In contrast, those who believe the likelihood to be low or very low increased significantly, rising to 30%, a 15-percentage point surge.
Despite the overall confidence, several concerns persist among market participants. Cyber attacks and geopolitical risks remain the most frequently cited threats, with 80% and 66% of respondents, respectively, identifying them as significant concerns. Inflation risk, after a decrease in the previous survey, saw a slight uptick at 57%.
Notably, the number of participants citing risks associated with a UK economic downturn increased sharply by 20 percentage points, reaching 52%.
A notable highlight of the survey is the mention of artificial intelligence (AI) as a potential risk to financial stability. Around 7% of respondents flagged AI-related concerns, citing potential labor market disruptions and increased financial crime as primary worries.
Climate risk, though not among the top five, was acknowledged by 39% of respondents. These concerns included both risks associated with the transition to a low-carbon economy and physical risks arising from climate-related disasters.
Beyond the top five concerns, survey participants pointed to increased worries about financial market disruption/dislocation (21%) and the risk of financial institution failure/distress (14%).
However, the share of respondents citing UK political risk and risks associated with an overseas/global economic downturn decreased.
