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 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).

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, 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).

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.

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.^{footnote [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).

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).

Key risks most likely to materialise

Respondents were asked to rank the five risks they thought would be the most likely to materialise.^{footnote [4]}

The most cited risks are shown below (Chart 7):

1. Geopolitical risk (67% of respondents, +26 percentage points since the 2023 H2 survey).

2. Cyber attack (40%, -6 percentage points).

3. Risks associated with a UK economic downturn (37%, -2 percentage points).

4. Inflation risk (20%, -32 percentage points).

• Geopolitical risk and cyber attack remain the most likely to materialise according to respondents.
• The perceived likelihood of inflation risk materialising has decreased significantly since the previous survey with 20% respondents citing this as one of the most likely risks to materialise (-32 percentage points).
• Household/corporate credit risk is now considered likely by 12% of respondents (+8 percentage points).

Data appendix

• Table A1

  Aggregate risks to the UK financial system ^{(a) (b)}

  • 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.

• Table A2

  Sources of risk to the UK financial system ^{(a) (b) (c) (d)}

  • 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.

• Table A3

  Risks most challenging to manage as a firm ^{(a) (b) (c)}

  • 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.

• Table A4

  Risks most probable to materialise ^{(a) (b) (c)}

  • 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-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.