This annual survey produced by the CSFI (Centre for the Study of Financial Innovation) and sponsored by PricewaterhouseCoopers, puts together a league table of potential sources of risks to banks and ranks them by severity. The survey was carried out in November and December 2009, and received 443 responses from individuals in 49 countries. The questionnaire was in three parts. In the first, respondents were asked to describe, in their own words, their main concerns about the financial system over the next 2-3 years. In the second, they were asked to rate a list of potential risks, or Banana Skins, selected by a CSFI/PwC panel, both by severity and whether they were rising, steady or falling. In the third, they were asked to rate the preparedness of financial institutions to handle the risks they identified.
The number one concern identified by this year’s survey is that of Political interference. The recent financial crisis saw many Governments stepping in to rescue their banks from collapse. This has resulted in the industry becoming deeply politicised, a development which respondents to the survey find the greatest source of risk for the banking sector. Political interference is problematic because it distorts commercial judgement, creates moral hazard and raises uncertainty about how and when financial support will be removed.
The top five risks (with last years position):
1 Political interference (-)
2 Credit risk (2)
3 Too much regulation (8)
4 Macro-economic trends (5)
The full report can be downloaded from the PricewaterhouseCooper’s website
Photo from Creative Commons: Flickr: Amanda Rudkin