Fears over high impact event at new peak, says BoE

Private sector fears over a high impact event hitting the UK financial system are at their highest levels ever, according to the Bank of England (BoE).

The Bank’s biannual Systemic Risk Survey has revealed more people are predicting a high impact event in the second half of 2011 than ever before in the survey’s history.

Equally, confidence in the stability of the UK financial system as a whole over the next three years has fallen to the lowest levels since the second half of 2009.

The sovereign debt crisis poses the greatest potential risk according to 76% of respondents. An equal figure predict it would be an economic downturn while funding risk drew 57%.

Regulation and taxes were considered the greatest risk by 38% of respondents while the risk of financial institution failure or distress drew 26%.

Two of the 68 financial institutions to respond cited a financial transaction tax as a key risk.

The risk of financial failure is new to the top five concerns, replacing the risks of property price falls and financial market disruption/dislocation from the previous survey.

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