LONDON (MNI) – Market participants are more optimistic that there
will be no major shock in the near or medium term, according to a Bank
of England survey.

The most widely cited risk of a major shock came from sovereigns,
followed by the risk of a fresh economic downturn. The H2 survey finds,
however, market participants were less pessimistic than they were
last year and in the first half of this year.

The survey, conducted between 24 September and 25 October, found
only 1% of respondents said the probability of a high impact event was
very high in the near term while 19% considered it high.

The 20% of respondents saying the risk was either high or very
high was down from 36% in H1 and down from the 55% peak in H2 2011.

Even in the medium term, only a minority believe a high-impact
event is likely. In all, 41% said the risk was high or very high, down
from 48% in H1 and 60% in H2 2011.

In all 34% said the chances of a high-impact event had decreased
in the near term over the past six months, with 54% saying it was

Respondents have become more optimistic about the resilience of the
UK financial system, with 87% of respondents either completely or very
confident in the stability of the system as a whole over the next three

Respondents were asked to list the five risks they thought would
have the greatest impact on the UK financial system if they were to

Top of the list, cited by 94% of respondents, was sovereign risk
followed by an economic downturn cited by 77%. Regulatory/tax risk was
cited by 34% and 32% cited funding risk.

-London bureau: +4420 7862 7491; email: