Sixty-eight market participants, including hedge funds, banks, building societies, large complex financial institutions (LCFIs), asset managers and insurers participated in the survey in which 54% of the respondents thought the risk of a "high impact event" was high or very high with only 3% saying such a risk was low or very low.

Covering the second half of 2011, the survey reveals that the confidence in the financial stability of the UK over the next three years dropped to its lowest level since the second half of 2009, with 28% of respondents saying they were not very confident and 57% stating they were only fairly confident in the financial stability of the UK.

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The survey asked the respondents what they believed were the top five risks the British financial system. Sovereign risk was cited by 76% of respondents as the number one risk to Britain’s financial stability.

of the failure or distress of a major financial institution was cited by 26% of respondents as a major risk , surpassing the fear of precipitous property price declines and financial market dislocation.

According to the survey, the specific concern cited in the sovereign risk category was Europe: 68% of respondents cited either Europe, the European Union (EU) or the European Economic Area as the primary source of anxiety about sovereign risk.

The survey is part of the BOE’s efforts to quantify and track market participants’ views of risks to and confidence in the UK financial system., In so doing, the BOE hopes to increase its ability tospot risks earlier so that action can be taken before markets destabilise.
The first such survey was carried out in July 2008, just weeks before Lehman’s demise sent the global financial system into near meltdown.

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